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2019 USS Valuations

So-called "Independent" report

Commendation by judges of The John Maddox Prize for Standing up for Science 2019

[The judges] wanted to draw attention to the extraordinary contribution made over the past year by Jane Hutton, who advocated for the transparency of statistical evidence behind claims about the deficit faced by the UK’s USS pension scheme, which has drawn attention to the wider issue that many statistical models on which the public depends are obscured from public scrutiny.

I would like to thank the colleagues in Warwick Statistics and the University of Warwick senior management who have been generous in their support of me; and also many Christian friends who have prayed that justice and truth will be achieved.

With regard to regulation in the financial sector, I quote from the first report of the All Party Parliamentary Group on Whistleblowing: "MP's have experienced the frustration and the challenges of trying to access support from regulators who put up barriers to prevent what is simply someone trying to do the right thing." (page 2).

I am disappointed that the standards of data management and analysis which I have seen in the financial sector are so far below those required for medicines and medical devices. The Royal Statistical Society has set up a Special Interest Group in Finance and Economics ``to discuss how statistics are or could be used across finance, economics, actuarial, quantitative finance, econometrics and financial mathematics."

Valuations and statistics.

Valuations of pension funds rely on several aspects of statistics. I have tried to ensure that the 2017 and 2018 valuations use statistical methods at the standard of data quality, analysis and reporting which is required in drug regulation. I provided written comments to the USS Board, and requested further information. I faced many obstacles. I wrote to the Pensions Regulator, and to the Financial Reporting Council, which is responsible for actuarial standards. Both regulators have been slow, and have taken little action. A parliamentary report on whistle blowing noted:

"MP's have experienced the frustration and the challenges of trying to access support from regulators who put up barriers to prevent what is simply someone trying to do the right thing." (page 2). See report.

"Independent" report

The USS commissioned an "independent" report into concerns about me.

I have been informed by USS that I am not allowed to have a copy of the final "Independent" Report. I was not allowed to have a copy of the draft report. I would be allowed to see hard copies in a "physical data room" in London. However, I am not allowed to make any copy, whether physical, electronic or photographic. (I guess some people would like me to certify that my brain was washed after seeing the reports.)

I have been sent a copy of the "Executive Summary". The instructions from the USS lawyers are that neither I nor the lawyers whom I have instructed are not allowed to use or refer to the reports.

I presume the same restrictions have been placed on all the non-executive directors. If none of the USS directors are allowed to use or refer to the reports, why has so much money, taken from members and employers contributions, been spent preparing the reports?

The Pensions Regulator has informed me that they will see the report which I am not to allowed to hold.

I ask the USS Board to publish the Executive Summary of Slaughter & May's report. I am the only person who is named in the Executive Summary, and I have no objection to publication. Jane L Hutton

The Executive Summary is a summary to a report which I and my advisers have not seen. We do not in any way agree with the approach taken by USS to the investigation, nor with the findings. Readers can form their own view from the Executive Summary whether the report is independent or accurate, and the extent to which it is separate from my public interest disclosures.

Eastwood's letter on termination

I regard the USS statement as including several misleading statements. I do not accept the validity of either the process or the decision. I will be taking a number of actions to address the process, the decisions, and the accuracy of the assumptions and modeling which underlie the 2017 and 2018 valuations.

There is a very conspicuous discrepancy between the claims around openness and transparency, and the actual responses when questions are asked. It appears USS can slander me in public but I cannot say anything about them. Eastwood's letter merely states "Slaughter and May made recommendations, some of which concerned potential improvements to policies and procedures." I think that UUK, UCU and the Joint Expert Panel should see what issues were raised regarding USS' policies and procedures.

I am the only person who is named in the Executive Summary, and I have no objection to publication. It would be sensible for the Executive Summary to be in the public domain. There are many interested members, with a wide range of expertise, of this £60 to 70 billion pension fund. I cannot see any reason why the full report should not be put in the public domain. What is the point of a report that no one is supposed to use or refer to?


The procedures USS followed have not been of a standard I would wish to see. One can consider natural justice and the UK employment law. The USS' own whistleblowing policy applies to non-executive directors. As USS claims my termination is "completely separate" from the issues that I highlighted as a whistleblower, I do not know what "behaviour as it pertains to [my] duties and legal responsibilities as a director" was considered.

I would be interested to know what my academic colleagues have to say regarding the duties and legal responsibilities of a non-executive director of a Trustee Company are.

Open letter to UUK

Dear Principals, Vice-Chancellors, Finance Directors

I am writing to you as a Non-Executive Director of the USS Board. I was appointed because I am an expert statistician, with international recognition, and a Professor of Statistics at the University of Warwick. I am concerned that universities are being asked by USS to pay unnecessary monies to address a deficit in the pension scheme, which deficit has not been calculated correctly. My requests to the USS Board for the information which would enable me to evaluate my belief have been denied. The purpose of this letter is to ask you to support my request for this information.

The USS Board has asked the university sector for an additional contribution of £0.75 billion per year to meet an deficit which they estimated in 2017 of £7.5 billion. In 2018, USS revised the estimated deficit down to £3.6 billion, but are continuing to ask for the same additional contribution of £0.75 billion per year. In order to fulfill my duty as a director, I have requested information which would allow me to evaluate whether the assumptions and models used for the calculations by the USS Board are valid.

If I am correct, universities are being asked to find £0.75 billion per year to address a deficit which has been overestimated. It is a matter of the utmost importance that universities do not divert money needed for research and teaching to meet a deficit calculated by faulty models. My aim is to secure an accurate valuation of USS. My belief that the models are faulty is supported by the report of the Joint Expert Panel set up by UUK and UCU. USS proposed a contribution of 36.6%. The Joint Expert Panel, however, concluded that a contribution of 29.2%, would make the risk of deficit negligible.

I have repeatedly been denied the information I requested. I have in fact been suspended from the USS Board without proper explanation; I can only assume that the suspension arises from my persistence in seeking the necessary information.

As you will appreciate, risk assessment is a critical element of the models used in the calculation. Dissatisfaction with the USS Board’s approach to risk assessment is underlined by the Prof Sir David Spiegelhalter1 and 1017 other academics in a letter to the Financial Times which includes the following:

"We believe the conduct of USS valuation over the past two years has brought the scheme into disrepute. An inquiry is urgently needed to obtain the necessary information to assess the USS's claims, review the conduct of the USS executive, trustees and the Pensions Regulator, and ultimately to rebuild members' and employers' trust and confidence in the scheme. It would be appropriate for a select committee of parliament to investigate."

The matter cannot be resolved satisfactorily by suspending a director who is simply asking questions to elicit information on behalf of stakeholders. If all the assumptions and models used by USS are correct, why would the Board deny a director access to the information? Surely demonstrating that the results are correct on the basis of public access to the information would settle the matter definitively.

In view of this and the unnecessary burden which has been placed on University funding I am writing to ask you to demand access to the information which I have requested over the last 2 years.

Yours sincerely

Jane Hutton, 9 September 2019

Professor J L Hutton
Department of Statistics, The University of Warwick, Coventry, CV4 7AL

1 Prof Sir David Spiegelhalter was the Winton Professor for the Public Understanding of Risk, University of Cambridge.

Amos 8:4-8

Shifting public sector DB plans to DC

Research from Canada 'examines the claim that converting public sector DB plans to DC is in the best interests of taxpayers and other stakeholders'

Legal advice.

In response to the concerns I have expressed, and my requests as a director for information so that I can fulfill my duty, the USS has instructed the following five firms of solicitors:

CMS, Eversheds, Gowlings, Linklater, Slaughter and May