The Times - UK (2022-01-26)

42 Wednesday January 26 2022 | the times

Business

The Pensions Regulator. To be excluded from its jurisdiction, a scheme must be set up by legis- lation, as well as having a government guarantee. A department spokesman said: “The hypothetical scenario des- cribed would require every UK university and other contributing employer in our world-leading universities sector to go bust. This is not something the government expects or intends to let happen.” Universities have been at logger- heads with the University and Col-

The government may inadvert- ently have signed up to guarantee the country’s biggest private sector pension scheme in a move des- cribed as “an embarrassing cock- up” by the consultant who un- earthed the information. The Department for Education agreed in 2017 to guarantee the pensions of four members of the Universities Superannuation Scheme when they joined the Office for Students quango, but in so doing it has, hypothetically at least, underwritten the entire scheme, which by one measure has a £15 billion shortfall. The fund, which is due to pay pensions to 475,000 present and former university employees, is a “last man standing scheme”, which means that its sponsoring employers are responsible for the liabilities of other sponsors if they fail. It recently announced a 20-year moratorium preventing any employer leaving the scheme to re- duce the risk of further desertions after Trinity College, Cambridge, decided to quit as a scheme spon- sor, paying £30 million to extricate itself from future liabilities. John Ralfe, an independent pensions consultant, has received confirmation from the education department of the guarantee arrangement after a freedom of information request. He said that the guarantee was “excellent news” for members, but “not such good news for tax- payers”, adding that it had other implications. Schemes with a government guarantee are not eligible for the Pension Protection Fund lifeboat, putting USS in the same position as the BT pension scheme, which was given a Crown guarantee when BT was privatised in 1984. “So USS could claim back the £4 million-a-year PPF levy it has paid since 2018,” Ralfe suggested. However, the USS, even with this guarantee, could not ignore

A Chinese fast-fashion retailer that overtook Amazon as the most downloaded shopping app in America last year has revived plans for a $50 billion New York stock market listing in 2022. Shein, pronounced She-in, is said to be working with advisers at Bank of America, Goldman Sachs and JP Morgan on the flotation. Shein was rumoured to have con- sidered a New York listing two years ago, with Goldman Sachs linked to the process, but it with- drew plans amid market volatility and rising US-Chinese tensions. A listing of Shein would force more transparency from the private company, which refuses to

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he dispute between universities and lecturers goes back to 2017, when universities tried to move from (expensive) defined-benefit to (cheaper) defined-contribution pensions. Strikes followed in 2018, 2019, 2020 and 2021. The proposal is to retain a defined- benefit pension up to £40,000 salary, with a lower-cost defined- contribution element on salary above this. The Universities Superannuation Scheme is Britains largest private sector scheme, with £80.5 billion assets as of March 2021. But its liabilities are £95.5 billion, leaving it with a £15 billion deficit. The lecturers’ union argues that cutting future defined-benefit pensions is unnecessary and that the annual cost of new defined-benefit promises, and deficit, are exaggerated. There have been calls for the government to solve the problem by guaranteeing the USS, but my Freedom of Information reply from the Department for Education shows the government is already guaranteeing it, not because of a

State ‘unwittingly’

backing pensions

of university staff

Patrick Hosking Financial Editor

Shein takes a shine to New York

disclose sales data and has main- tained such a low profile that it has only recently received attention from the retail industry. The rapid global growth of the business is causing a problem for established online rivals, such as Asos and Boohoo, while Shein surpassed H&M and Zara in the US last year to become the largest fast-fashion retailer by sales, according to Ear- nest, a data analytics company. Shein’s growth is thanks to its use of artificial intelligence, automated factories in Guangzhou and social media. Chris Xu found- ed Shein in 2008

and, while it does not sell clothes in China, it ships to 150 countries. The company is said to have made about 100 billion yuan (£11.7 billion) sales last year and adds 6,000 new items a day to its website. Reports suggest Xu is considering becoming a Sing- aporean citizen to ease the path to a New York listing amid China’s toughening stance on overseas flota- tions. Shein said: “Neither our company CEO, Chris Xu, nor other executives have applied for Singa- porean citizenship”

Ashley Armstrong Retail Editor

Khloé Kardashian is one of Shein’s celebrity fans

Capricorn Energy is to split $700 million of returns to shareholders between a tender offer for shares and an open market buy- back after it receives more than $1 billion from the Indian government to settle a long-running tax dispute. The oil and gas explorer plans to use $500 million for a tender offer to shareholders to sell their stakes. The pricing of the offer will be fixed in a circular to investors, which is expected to be published shortly after the payment is finalised. A further $200 million will be al- located to an open market buying back of shares, with the remainder to be used for working capital or to

Capricorn

Greig Cameron

B

ritain must avoid allowing domestic companies to be undercut by Indian imports with lower labour costs if the countries sign a trade deal, a report has warned (Louisa Clarence- Smith writes). The Resolution Foundation

India trade

deal ‘comes

with risk’

conspiracy but what looks like an embarrassing cock-up. How did this happen? The Office for Students was set up in 2018 as a Department for Education quango to regulate higher education in England. Almost all its staff are in the Civil Service Pension Scheme, but four, who previously worked in universities, are in the USS. It is a requirement “for non- university employers to provide a guarantor”, so the department’s annual report discloses that it guarantees the Office for Students’ USS obligations. I have obtained a copy of the guarantee, dated October 2017. The USS’s “last man standing” rules mean that each employer, however large or small, is on the hook for all USS liabilities, not only its share. How can the government get out of this mess? It should be easy for the Office for Students to persuade its four active members to stop paying into the USS and to open a personal pension, perhaps with an incentive payment. But there is no magic wand for the USS. The only solution is to go back to the original 2017 plan to move from defined-benefit to defined- contribution, with a generous employer contribution, still leaving employers to plug the deficit over several years.

John Ralfe

Comment

lege Union as they address the deficit by lifting staff contribution rates and reducing pension bene- fits, leading to a series of strikes. The spokesman said: “Higher education providers that offer the USS are responsible for the pension provision offered to their staff. The Pensions Regulator is cur- rently working with the USS, Uni- versities UK [the employers’ body] and a range of other stakeholders as they work to find a long-term solution to the funding challenges faced by the USS.”

The Times - UK (2022-01-26)

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