Using tuition fees to plug the Universities Superannuation Scheme’s £17.5bn pension deficit is a clear example of how the transfer of wealth from young to old presents a real threat to long-term societal and economic sustainability.
The fact that the Universities Superannuation Scheme (USS) gained an impressive 20.1% in 2016-17 and meaningfully cut costs has been largely overlooked in the press. Focus has instead centred on the growing deficit, which reached £17.5bn, making it the largest pension black hole in the UK.
While I can empathise with USS’s dilemma - despite generating 12% returns a year over the last five years, the staggering growth in their liabilities has been largely driven by falling interest rates and lower yields on UK government bonds, factors that are outside the scheme’s control - it raises alarm bells about the long-term prospects for Britain’s economic and societal sustainability.
The scheme has yet to make clear how it plans to plug that hole, but in the meantime, experts have pointed to tuition fees as part of the solution. The options being presented are that either fees have to go up, or fees stay the same, but more money is diverted away from teaching to fund the pension promises made to USS’s 390,000-strong academic membership.
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