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Newsmakers

UK’s Biggest Pension Fund Facing Lawsuit, Potential Strikes Over Benefit Cuts

The plan is increasing contributions while cutting benefits despite significant investment returns last year.
By Anna Gordon


The Universities Superannuation Scheme, which maintains retirement plans for 470,000 university employees across the UK, is facing a lawsuit.

Members of the pension are accusing the directors of the fund of breaching their duty to beneficiaries. Much of the controversy revolves around the 2020 valuation of the pension’s assets, in which directors assumed there would be 0% growth over in assets over the next 30 years relative to inflation, according to Pensions Expert.

But since the low point of the pandemic, USS has appeared to recover all of its losses. Before the pandemic in 2019, the fund reported approximately $91 billion (£67.4 billion) in assets under management. For the year ending March 31, 2020, the pension reported $89.95 billion (£66.5 billion) in assets under management. However, by the time the fund filed again in 2021, it reported a gain of 21% with $109 billion (£80.6 billion) in AUM.

But despite these gains, the pension has decided to continue with its planned cuts in benefits, which has made many beneficiaries angry.

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Nevertheless, USS and its chief executive are arguing that the pension fund is still at risk of not being able to pay its promised liabilities. As of the most recent performance report, the pension still has at least $20.5 billion (£15.2 billion) in unfunded liabilities.

Currently, employees at 68 universities are threatening to strike if both benefits to retirees are cut and pension contributions are raised.

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UK State Pension Struggling to Manage Inflation

UK Government Considering Relaxing Fee Cap on AUM

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Home > News > Regulation > 10-Year Treasury Yield Moves Higher
Regulation

10-Year Treasury Yield Moves Higher

The benchmark nears 2% amid coming Fed hikes and surging inflation.
By Larry Light


As investors await the latest inflation report, the 10-year Treasury yield rose to around 1.95% this morning, a level it hasn’t touched since November 2019. The 10-year yield started the year at 1.63%. Many analysts believe it will reach 2% soon.

This comes as the Consumer Price Index jumped to 7.0% for December. The number for January is due out Thursday morning, and analysts’ consensus is for 7.1%, offering no relief to inflation-weary investors and consumers.

The bond market is responding to the Federal Reserve’s expected start of its rate-hiking campaign, due to kick off at its March meeting. The bond selloff—their prices move opposite yields—reflects four to five quarter-point hikes expected this year.

In anticipation of Fed actions, Treasury yields have started to rise across the board. The two-year Treasury is now at 1.33%, up from 0.78% at the year’s start.

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With bond yields making new highs, stocks have encountered rough times lately, especially last month. Higher bond yields render future profits less valuable, so stock valuations fall. That phenomenon is most impactful for tech stocks because many tech firms expect most of their earnings to appear further in the future.

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