Financial Times – Letters, 18th November 2021
In responding to Martin Wolf’s column (Opinion, November 15) about the Universities Superannuation Scheme, Kate Barker remarks that “the analysis by Raghavendra Rau . . . takes no account of the consequences of being wrong” (Letters, November 17). This is correct but surely irrelevant. All promises for the future involve the risk of default.
The important distinction between uncertainty and assessable risk is admirably set out in Radical Uncertainty by John Kay and Mervyn King. We must, as they propose, adapt to the impossibility of avoiding the non-assessable element known as Knightian uncertainty. If this is done, I assume that Professor Rau’s conclusions will be agreed to be correct.
Barker, Wolf and Rau all acknowledge that those to whom promises are made cannot avoid the uncertainty of default and agree that the USS needs amendment to allow for this. I hope that it can be agreed to postpone both the threatened strike and changes in benefits or contributions, which may well prove unnecessary, while this is done.
Rau’s suggestion that shifting risk to scheme beneficiaries in exchange for some added benefit in the event of favourable returns seems an admirable starting point.
Andrew Smithers
London W8, UK