Trinity College and the USS

In common with all other Oxbridge Colleges, Trinity College, Cambridge used to be a member of the USS Pension Scheme. Uniquely it bought itself out of the scheme in 2019.

Some seem to believe that this is a significant, and regretable, issue. Here I argue that it is an insignificant, but mildly encouraging, issue.

I am not a member of Trinity, and certainly not of its governing body, but my understanding is that the reasons for its exit were mostly economic. Its significant endowment was, to a degree, underwriting the whole pensions scheme. And the contribution rates to the scheme were higher than would be required for a scheme containing only Trinity employees which was backed by Trinity's wealth. On the negative side, the divorce bill was quite high.

Below I consider various aspects of Trinity's departure.

It weakens the USS

It does if one treats the USS as a standard private multi-employer scheme. If, instead, one considers it to be backed by a whole sector of the economy (all pre-92 Universities), and that a sector which is mainly state funded and which it would be politically impossible to allow to fail, not to mention extremely damaging for the country to have its best Universities wiped out, then the arithmetic is rather different.

The removal of Trinity's assets from the scheme's underwriting has an impact if one believes in a very flawed methodology for considering the stability of the scheme. Most UK Universities have rather small endowments, so Trinity was making a significant contribution to the total assets of the employers. (Note that the endowment of Cambridge University and all its Colleges together would barely scrape into the top twenty US universities by endowment.)

If, instead, one prefers arguments about the pre-92 Universities forming a critical sector of the UK economy and social structure which cannot be allowed to fail, it makes no difference. So it weakens the USS only when flawed reasoning is used.

Note that the value of the USS's assets is approximately seventy times that of Trinity's endowment. Trinity is not that significant. Note too that to leave the USS Trinity had to pay a penalty charge (divorce bill) which was considerably greater than the likely amount of deficit in the USS attributable to its members. One could say that it made an eight figure donation to the USS. If anyone wishes to weaken my financial position like that, please get in contact.

Note too that Michael Otsuka, a member of the UCU's national negotiating team, wrote "it is hard to understand how withdrawal of such a small share of total assets of sponsors, which would be called upon in only the most improbable scenario, should make such a significant difference to convenant strength." (Otsuka, Twitter)

It shows a lamentable lack of solidarity

Rather it shows the effects of years of bullying in an environment devoid of solidarity and fairness. Trinity's influence as an employer over the USS was mostly in proportion to the number of employees it had in the USS: tiny. However, the entirety of Trinity's assets were underwriting the scheme, so arguably it was providing more underwriting than almost any other employer. For this it had very little influence on the income and investment strategy of the USS, and failings of the USS's economic strategy were leading to some muttering about Trinity's exposure to future disasters. Such mutterings were surely misplaced, but still had a negative impact on the perception of Trinity's credit-worthiness. It had zero influence over the financial strategies of other USS institutions, some of which were failing to accumulate assets, and were instead accumulating debt.

Even worse, the body which represents the employers on the USS's JNC is Universities UK. Not being a University, Trinity College is not a member of UUK.

The UCU has called strikes on several occasions over USS matters. When doing so, it has never included the Oxbridge Colleges in its action. Neither the management of the USS, nor the UCU, seems to value their opinions very highly. They just like their cash.

(In Cambridge most undergraduate supervisions are organised by the Colleges, so a key part of the undergraduate education experience was untouched by the UCU strikes.)

Others might follow

Unlikely. Trinity was in a very unusual position caused by it being wealthy and having surprisingly few members in the USS scheme. Many smaller Cambridge Colleges have more members in the USS. So Trinity's divorce bill, which was based on the number of members it had in the scheme, was smaller than it would have been for many other Colleges. This meant that the ratio of the leaving cost to the value of the assets being "protected" by being removed from underwriting the USS was uniquely small. Of course other Senior Bursars have done rough calculations for their own Colleges, and they have concluded that the divorce bill is far too high.

It shows a lack of confidence in the USS Trustees

Indeed it does. A well-placed one. The UCU frequently passes votes of no confidence in the chairman of the JNC or the trustees, but these votes are simply symbolic. Trinity's action is not of great consequence, but will have caused more disquiet to the Trustee than any number of UCU votes.

Trinity is always self-centered

Trinity gives a lot of its money to many University causes, over £2m a year to the University's Colleges' Fund for supporting poorer Colleges, over £5m a year in bursaries and studentships, and often other substantial donations to the University. Trinity's wealth does benefit the wider University, even before one considers the substantial number of College lecturers and similar which it funds and who work mostly in University Departments.

The risks to Trinity, and other wealthy employers, are merely theoretical

True in the past, but less so as actuaries are beginning to take seriously the presence of USS debt on employers' balance sheets, and reducing their credit rating accordingly. This has two impacts. It increases the interest rates that those institutions would pay if they raised loans, which they rarely do. But more importantly, it has consequences for any defined benefit pension scheme that they offer their non-USS employees (and not all employees are eligible for the USS).

The impact is two-fold. Once the Pensions Regulator starts having concerns about an employer's ability to meet any deficit in a scheme it is underwriting, it will insist on a more cautious investment strategy. That will reduce the expected income, and require increased contributions. Further, it will ask for a larger contribution towards the Pension Protection Fund by adding a risk-based levy to the general scheme levy. Both steps costs real money.

Trinity should rejoin anyway

Trinity is a charity, and its trustees are required by law to act in the best interests of the charity, furthering the charity's defined objectives. To rejoin the USS, Trinity would have to underwrite this national scheme with the entirety of its assets, for those are the scheme's rules. Given that some now believe that this underwriting is more than theoretical, and, if it were called upon, it could theoretically bankrupt even Trinity, would it even be possible for Trinity to rejoin? If I were a Trustee of the College, it is not something I would feel comfortable with, given that the gain to the charity would be slight (it is not likely that the USS would offer to repay the divorce bill).

What should the response be to Trinity's departure?

The regulatory framework of defined benefit pension schemes urgently needs to change. The liabilities of a DB scheme are likely to be around ten times an organisation's annual wage bill once the scheme reaches a steady state. Even small fluctuations in the calculation of liabilities or assets will potential lead to deficits which risk bankrupting the employer, and particularly undesirable outcome as future economic cycles may have eliminated the "deficit" without requiring any action at all from the employer.

Of course employers should make reasonable contributions into any DB scheme, and the Government Regulator should ensure that they do so, and that their investment strategy is prudent. But if this is done, can the Government not underwrite any deficit which might arise from past contributions? Not only does it have the ability, but it also benefits from the activity of pension funds. With liabilities wholly in Sterling, and no desire of over-exposure to exchange rate risks, pension funds tend to invest predominantly in the UK, and, indeed, invest considerably in UK Government Bonds. A little quid pro quo might not be out of place.

Boycott Trinity?

The UCU currently calls on its members to boycott Trinity College, including refusing to supervise undergraduates of the College. Should it?

If one believes that Trinity should not have left the USS, then, whilst it was debating the issue, it would have been reasonable to have put pressure on the College to think differently. But it has now left, and it is hard to see how its departure could be reversed by responsible Trustees. So hard, that I would expect the Charity Commissioner's attention to be drawn to the matter should it seriously consider rejoining the USS under the old terms.

So the current boycott would appear to be without end, in that there is nothing that Trinity can reasonably do to meet the demands of the boycotters. Can such a perpetual boycott be justified, especially when it is made in the name of solidarity whilst being itself divisive? Whilst some in the Cambridge branch of the UCU think so, see their motion of July 2019 and action of February 2020, along with emails to members in Michaelmas 2021, others do not. The bigger problems are the management and constitution of the USS, and neither Trinity nor the UCU have much confidence in them. I do not understand why the UCU wishes to disrupt students' education by picking fights that it is unlikely to win with those who mostly share its views.


Trinity's departure was an inevitable result of other USS institutions relying on its assets whilst giving it little say in how the USS, or those other institutions, conducted their financial affairs. It is also of little consequence to the USS, unless one believes in some rather warped accounting.

It has served to throw more light onto governance issues within the USS, and that is very welcome.