Universities Superannuation Scheme (USS) is the largest pension scheme in the UK (with total fund assets of £64.4 billion), providing pensions to the higher education sector. USS has been harnessing PFaroe’s capabilities since 2015, allowing it to improve internal control and scheme governance by bringing in-house some of the scheme monitoring and analysis.
Jeff Rowney, Head of Funding Strategy at USS, explains: “We wanted greater control and to be able to monitor the scheme more regularly than we had done in the past – and we wanted to work with a technology company that could provide us with powerful software to perform customised ad-hoc analysis on the modelling of our 400,000 or so members. Out of the products we looked at in the market, PFaroe is not only the most robust, it also offers the most flexibility.”
USS utilises PFaroe’s easy-to-access, user-friendly analytics to frequently monitor and review the scheme’s position efficiently and effectively.
“While our scheme actuary retains a central role in the oversight and management of the scheme, we wanted to supplement that with a means of gaining greater flexibility and faster turnaround times for ad-hoc analysis and reporting,” says Jeff Rowney. “Now, with our in-house team and the right technology, we can produce custom analyses and reporting when required, even on very tight timescales. As well as allowing us to increase our efficiency, we’ve also been able to reduce costs as a result.”
With PFaroe’s on-demand information, USS is able to effectively conduct and monitor liability valuations and accurately assess potential impacts of market changes.
“We are now able to review our position on a daily basis, using PFaroe to generate liability valuations which we can compare against our asset positions,” comments Jeff Rowney. “Movements and market changes are flagged and far more visible – positioning us to respond more quickly and make informed decisions.”
Guy Coughlan, Chief Risk Officer at USS, adds: “This also allows us to deepen our understanding of the scheme’s risk exposure, and get a sense of the degree to which the assumptions we have chosen are driving the outcome of the valuation of liabilities. PFaroe provides us with an important insight into what the critical assumptions are, how critical they are, and what kind of impact certain movements and changes would have on the scheme.”
The increased efficiency enabled by PFaroe also means that USS can report to the board and deliver information to its stakeholders on a timelier basis. Jeff Rowney explains that they can now produce the numbers for an actuarial valuation on a relatively tight timescale, within six weeks of the valuation date.
Guy Coughlan says: “A great deal of this is due to being able to run and model different sensitivities, different potential economic scenarios and different potential demographic scenarios very quickly – something PFaroe is particularly effective at.”
PFaroe’s extensive market presence, and the fact that it acts as a centralised, consistent, shared information platform, is also facilitating more effective engagement and collaboration between different teams within USS, as well as with the scheme actuary.
“This enables us to have more informed conversations and work together more effectively with our advisors,” says Jeff Rowney. “As a result of sharing the same platform, we are more aligned and better positioned to agree on an approach, focusing on strategy rather than a debate about the numbers.”
As an example, USS describes an ongoing project looking at demographic assumptions, and how the scheme is using PFaroe to test the sensitivity of the liabilities to different assumptions, in advance of any discussion with the scheme actuary and his actuarial advisory team.
Guy Coughlan adds: “The fact that we are both using the same model with the same benefit structure database built into it means we are therefore all looking at the same ‘golden source of truth’. So there is a greater focus on, and greater value derived from, ensuring that data is of the highest quality. If we were running different systems, that would be much harder to do. PFaroe is therefore helping to drive better data quality in this respect.”
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