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The USS Trustee’s governance crisis

  • 6 April 2021
  • By Neil Davies

This blog was kindly contributed by Dr Neil Davies, Senior Research Fellow at the Bristol Medical School, University of Bristol. You can find Neil on Twitter @nm_davies.

Since 2014, the Universities Superannuation Scheme (USS) has lurched from crisis to crisis. Member satisfaction with the scheme has collapsed from 68% in 2015 to 24% in 2020. The costs of the scheme have increased, while the remuneration of the scheme’s executives has skyrocketed. Valuations conducted in 2014, 2017, 2018, 2020 have lacked any credibility with members, leading to major industrial disputes. In response to this decline in member satisfaction, USS has lowered its target for member satisfaction from 70% to 30%.

A scheme without consequences

Why has USS’s response to this crisis been so insipid? One explanation is the scheme’s extremely weak governance and accountability to its stakeholders – university employees and employers across the UK.

USS is run by executives who are overseen by a board of 12 Trustees.* Four of these Trustees are appointed by UUK, three by UCU, and the Board appoints five independent trustees. However, the USS rules have no mechanism for either UCU or UUK to hold Trustees to account. Indeed the company that runs USS (USS Limited) has articles of association that were recently amended to remove the right of UUK and UCU to remove their Trustees. Therefore, if USS Trustees do not fulfil their obligations, employers and members are powerless under the current scheme’s rules.

Figure 1: USS CEO pay, member satisfaction and satisfaction KIP target 

How unusual is USS?

How does this compare to similar pension schemes that have not experienced the chaos, industrial strife and collapse in member confidence seen at USS? The Railways Pension Scheme (RPS) has 16 Trustees, eight of whom are appointed by employers, eight by members. An even closer match is the SAUL pension scheme for employees at the University of London. It has 12 Trustees, of whom unions appoint four, employers five, and there are up to three independents. Both members and employers have a far greater role in appointing Trustees to the Board of the SAUL than the USS pension scheme. Thus, one possible explanation for USS’s sub-optimal performance is the far weaker accountability and oversight it is subject to, compared to other schemes. Put simply, there is essentially no material consequence for USS’s poor performance due to the inability of members and employers to exert meaningful oversight of the Trustee.

How could this be fixed? 

At face value, this seems simply resolved: ‘we need to change the executives running the scheme’. However, this would be misplaced. While changing the current executives might provide short-term improvement, this would not insulate against such issues arising again in the future. In order to address this, in the longer-term, the USS Trustee must be accountable to its members. USS needs to have adequate governance and oversight so that irrespective of the executives running the scheme, USS still functions adequately and fairly and protects its members’ interests.

Improving accountability through representation

The Joint Expert Panel’s second report made the following recommendations to improve accountability and governance: 

The scheme rules should be updated to improve the governance of the valuation:

1) set up a funding and valuation sub-committee of the Trustee to liaise with the Joint Negotiating Committee (JNC);

2) establish a joint forum between the Trustee and JNC to undertake joint modelling of the valuation assumptions; and 

3) create a senior Steering Committee for the valuation comprising employer and member representatives.

Under rule 79 of the scheme rules, the Joint Negotiating Committee (JNC) can propose changes to the scheme rules. The JNC comprises five members appointed by UUK and five by UCU, plus an independent chair. As it stands, UUK is committed to implementing the JEP recommendations, so in principle, it should be possible for the JNC to agree to this. 

Naturally, USS has done almost nothing to implement the recommendations of the JEP. It has made no changes in governance to the scheme rules beyond the changes making it impossible for stakeholders to recall their Trustees. The JNC should recommend changes to the scheme rules to implement the JEP’s recommendations above. 

A final hurdle

Imagine that JNC proposed all the actions listed above. The USS would not have to enact it. This is because of the following rule:

This arcane rule means that the Board of Trustees can reject any proposal from the JNC that is considered ‘undesirable’. For instance, suppose the JNC recommended that the board remove article 79.7.5 because it makes the board unaccountable to employers and members. The Trustees can just reject the JNC’s proposal as ‘undesirable’.

This situation is deeply unsustainable, as reforming the scheme’s governance is the only sustainable way to recover members’ trust. 

Other amendments exist that could improve oversight and accountability. These may include substantially increasing the proportion of the Trustees whom stakeholders appoint as in SAUL.  This could also include a more radical approach involving replacing the independent trustees with member appointed trustees, as in RPS. More simply, the rules could be reverted to allow stakeholders to recall their trustees, as was possible until 2020.

One thing is for sure. Unless the USS governance is urgently reformed, the cycle of acrimony over the scheme is very likely to continue. 

*Ironically, USS does not appear to meet the good governance criteria it applies to the companies it invests in. USS has voted against investing in companies with excessive executive remuneration, and against investing in companies with boards whose members were not at least a third women, twice the current level of the USS board. 2016 was a truly landmark year for the scheme, as it was the only year in 25 years, that a third of USS board members were women. One of the women appointed to the board in 2016, Prof Jane Hutton, was later removed from the board – legal action is ongoing. Shockingly, no one from a BAME background has ever been a board member since available records began in 1996.


  1. Stephanie says:

    As a member of the USS, this is more than disheartening to read. I feel disempowered, even though I am essentially an investor in the scheme. Do you feel there a role here for pensions regulator to play in ensuring suitable governance, similar to that of the Charities Commission?

  2. Neil Davies says:

    I know – a feeling many members share. TPR already has a role in overseeing DB pension scheme governance. But the current situation suits TPR – the board follows their recommendations extremely closely, even when TPR’s recommendations are likely to result in very detrimental outcomes for members. This is what we’re seeing in the 2020 valuation. So it’s unlikely that TPR would push for members to have a stronger role in providing oversight and accountability of the Trustee. Another approach would be to get in contact with the Work and Pensions Parliamentary Committee.

  3. Andrew Wray says:

    Is there value in writing to MPs? Bristol North is an unusual constituency in having a very active MP and also a large number of university employees from UoB and UWE.
    It’s deeply annoying that the USS Executive pay is higher than that of any university staff, even Vice Chancellors

  4. Neil Davies says:

    Yes it would be well worth writing to your MP. I would strongly recommend raising serious concerns about the role of TPR in this debacle, and they evidence (or lack of evidence) they’re using to justify the guidance they’re giving to schemes like USS.

  5. reader says:

    ‘USS Ltd recently removed the right of UUK and UCU to remove their Trustees. Therefore, if USS Trustees do not fulfil their obligations, employers and members are powerless under the current scheme’s rules.’

    Well, well. I was not aware of that. In fact, that seems to apply to both removing and appointing people: “no director (including those appointed by Universities UK and UCU) may now be appointed or removed from the Trustee Board without the Trustee Board’s consent”.

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