Utility of USS’s self-sufficiency funding ratio condition

Ascertain the practical utility and risk-management role of the self-sufficiency funding ratio condition in USS’s self-sufficiency definition—specifically the requirement to achieve a 90% self-sufficiency funding level at each triennial valuation with 95% confidence—given evidence that the condition does not predict the ability to pay benefits and appears to dominate liability determination.

Background

USS defines self-sufficiency using two conditions: (1) a 95% confidence level of paying all benefits without additional contributions, and (2) a 95% confidence level of maintaining a 90% funding ratio at each triennial valuation. The paper’s analysis suggests that the funding ratio condition dominates the determination of self-sufficiency liabilities and is highly sensitive to gilt yields, yet it does not effectively predict benefit payment capability.

The author notes the absence of USS analysis explaining the practical role of the funding ratio condition, raising questions about its usefulness in risk management and its inflationary effect on liabilities and contributions.