Changes to USS Pensions

Posted by rmt22 at Jan 31, 2018 03:10 PM |
Changes are proposed to the USS pension scheme following a national negotiation. Find out more here.

The USS scheme is a national pension scheme with around 300,000 members across 350 organisations. We offer USS pensions to our staff on Grades 6-10.

What’s the issue?

Under UK pensions regulations every three years there is a valuation of the scheme. At a valuation the costs of providing benefits are compared to the assets of the scheme and this either results in a surplus or deficit in the scheme. At the last valuation in 2014 USS reported a deficit of £5.3 billion, which has increased to £6.1 billion at the 2017 valuation. The issues faced by USS are not unusual – most defined benefit pension schemes are facing pressures due to people living for longer and interest and gilt rates remaining low for many years.

If the scheme remained as it is it, we would need increase contributions at the University by 11% which would mean the University paying an extra £10 million per year or a significant cut in staff take-home pay, or a combination of the two.

What has happened?

UUK and UCU have been negotiating to try and come to a solution for the 350 employers participating in the scheme. There is a long established process for deciding on changes to the USS scheme through the Joint Negotiating Committee, the JNC. Over recent months both UUK and UCU have tabled proposals to the JNC. At the meeting last week the JNC made a decision to adopt the UUK proposal for changes.

The decision was made by the Independent Chair casting his vote. It has been reported that the JNC was deadlocked but to avoid confusion this did form a formal decision of the JNC which starts the process of making changes to the scheme benefits.

What has been agreed?

The main elements of the proposal are:

Employer contributions

  • Employers will continue to pay a contribution of 18% of salaries towards USS, and it is proposed that this important commitment is extended from March 2020 to March 2023.

Member contributions

  • Members will continue to pay 8% of salaries towards USS.
  • A new option is being proposed which would allow members to pay less (4% is proposed), whilst still benefitting from the full employer contribution of 18%.

Main benefit change

  • The JNC proposal is to change USS so that members earn defined contribution (DC) benefits on all of their salary from April 2019. Currently DC benefits are only earned on salary over £55,550, with defined benefits (DB) earned on salary below the threshold.
  • DC and DB benefits are quite distinct, and both have their advantages.
  • In a DC scheme, members have individual saving pots (or funds) that both they and their employer pay into. At retirement, members draw their pension savings from their fund which consists of all of the contributions paid in plus the investment returns that have been earned. They can then choose whether they wish to take out all their retirement savings as a lump sum, or to opt for alternative options such as a pension (known as an annuity) or drawdown (where cash is drawn from the fund periodically).
  • More information on the difference between DB and DC pension schemes can be found on Universities UK’s website.

What’s next?

Consultation on the changes will begin in March and we will be providing more information to affected staff before this and during the consultation.

Detailed information on the changes proposed is available in the attached PDF, and on UUK’s website which includes messages for students, frequently asked questions and facts about the negotiations and valuation.

Share this page: