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USS Pension

Page updated 09/01/2024

USS Pensions Update

What you pay towards the USS Pensions scheme and what you get is changing. Here's a summary. 

Here's a summary. 

  • From 1 January 2024 you’ll pay a lower member contribution rate of 6.1% instead of 9.8% of salary. The University’s contribution rate will also reduce from 21.6% to 14.5%.  

  • From 1 April 2024, you’ll also build up benefits differently, as set out in the 2023 consultation. This reflects the proposed package of benefit and contribution rate changes.  

More details will be provided in a further update from USS which is expected to be circulated in March 2024. USS has provided an initial outline: 

A higher accrual rate for your defined benefit pension 

The rate at which you build benefits in the defined benefit part of USS, the Retirement Income Builder, will increase. 

Currently you get 1/85 of salary (up to the salary threshold) in defined benefit pension each year and 3/85 of salary as a lump sum on retirement. This will increase to 1/75 of salary for pension benefits and 3/75 of salary for the lump sum respectively (for salary up to the salary threshold).  

Salary threshold increase 

The salary threshold is anticipated to be £70,308. This means if your salary is higher than the current salary threshold (£41,004), you’ll start building up a greater proportion of defined benefits in the Retirement Income Builder, the defined benefit part, and less savings in the Investment Builder, the defined contribution part.  

If your salary is below the current salary threshold, the increase to the salary threshold will not impact your benefits. 

The salary threshold will be increased annually until 31 March 2026 or, if earlier, the outcome of a review by the JNC, in line with increases to official pensions, which broadly go up in line with CPI inflation, subject to a cap. It is proposed that the cap would be changed from the current 2.5% to a maximum of 10% (subject to certain limits, as described in the pension increases section below). 

Higher cap for future pension increases 

The benefits that you have built up since 1 April 2022 in the Retirement Income Builder, the defined benefit part, would increase every year both before and after you retire in line with increases to official pensions, which currently go up in line with CPI inflation.  

They will be subject to a higher maximum increase of 10% rather than the cap of 2.5% (which had been deferred to 1 April 2026 but applying to benefits built up from 1 April 2022). Increases will be as follows: 

  • Where inflation (currently CPI) is 5% or less, the increase will be matched. 

  • Where inflation is more than 5% but less than 15%, the increase will be 5% plus half of the percentage increase over 5%. 

  • Where inflation is 15% or more, the increase applied will be 10%. 

1 April 2024 – a one-off benefit uplift 

If you are eligible and have any period of active membership in the period 1 April 2022 to 31 March 2024, and you do not retire before 1 April 2024, you’ll receive a £215 uplift to your annual pension, plus an associated £645 retirement lump sum (subject to certain criteria). 

If you’ve retired and meet the criteria, you’ll get a pension uplift of £241 per year. 

 

USS Consultation 2023 

Summary of the JNC’s proposed changes 

The JNC has proposed improvements to your benefits. The changes would see the pre-April 2022 benefit structure re-introduced with effect from 1 April 2024. The JNC has proposed the following: 

1. Salary threshold increase 

It is proposed that the salary threshold will increase from the current level of £41,004 to within the range of £66,400 to £73,040 with effect from 1 April 2024 (the threshold applied will be determined by the annual rate of CPI inflation to September 2023). 

The salary threshold would continue to be increased annually in line with inflation (subject to a cap) and it is proposed that the cap increases from 2.5% to a maximum of 10% for benefits built up from 1 April 2022, with the increases applying as follows:  

  • Where inflation (currently CPI) is 5% or less, the increase would be matched. 

  • Where CPI is more than 5% but less than 15%, the increase would be 5% plus half of the percentage increase over 5%. 

  • Where CPI is 15% or more, the increase applied would be 10%. 

2. A higher accrual rate for your defined benefits 

It is proposed that the rate at which you build benefits in the defined benefit part of the scheme, the USS Retirement Income Builder, will increase as follows: 

  • Currently, you get 1/85 of salary (up to the salary threshold) in defined benefit pension each year and 3/85 as a lump sum on retirement. 

  • It is proposed to increase this to 1/75 pension and a 3/75 lump sum respectively. 

3. Higher cap for future pension increases 

It is proposed that the cap on increases to benefits built up from 1 April 2022 goes up from 2.5% to a maximum of 10% (before and after retirement) to take into account inflation. This increase will be capped as follows: 

  • Where inflation (currently CPI) is 5% or less, the increase would be matched. 

  • Where CPI is more than 5% but less than 15%, the increase would be 5% plus half of the percentage increase over 5%. 

  • Where CPI is 15% or more, the increase applied would be 10%. 

What to do next 

  • Read more about the proposals below and on the consultation website from 25 September 2023. 

  • Use the modelling tool on the consultation website to understand how the changes could impact you. 

  • Give your views on the proposals before 5pm on 24 November 2023 so your voice is heard. You can do this from 9am on 25 September 2023, by following the login process on the consultation website or by giving your response to your employer. Any views you give on the website will be anonymous – the University will not be able to identify you in your response. 

Part Two: Your contribution 

Contributions to the defined benefit part of the scheme (the USS Retirement Income Builder) 

It’s anticipated that the contributions required to fund the JNC’s proposed benefit changes will be lower than those being paid today and will see both members and employers paying less than the 9.8% and 21.6% respectively that is currently contributed. 

The contribution rate required will be determined by the trustee, once UUK has completed the Technical Provisions consultation with employers and responded to the trustee. Then, the JNC will decide how contributions are split between members and employers. If the JNC does not reach a decision on how contributions are split, the default cost-sharing rule will be applied. This would see the reduction in contributions split between members and employers on a 35:65 basis. 

Contributions above the salary threshold to the defined contribution part of the scheme (the USS Investment Builder) 

Currently, 20% of your salary above the salary threshold (8% from your contribution above the salary threshold and 12% from your employer) is paid in to the defined contribution part of the scheme, your USS Investment Builder. 

Whilst the overall 20% of salary will remain unchanged, the JNC will confirm, later in the year, whether the proposed split of member and employer contributions within that 20% will change. 

Part three: Further Information 

Why the changes are being proposed 

As part of the 2023 valuation, it is anticipated that the trustee will determine that, as at 31 March 2023, USS has a funding surplus of £7.4bn, on a 'Technical Provisions' basis, which would mean that USS is 111% funded. 

It’s also anticipated that the combined member and employer contribution rate required to fund the current benefits provided by USS would reduce from the 31.4% currently required from members and employers (9.8% and 21.6% respectively) to 16.2%. 

In light of the improved funding position and outlook, the JNC has approved to consult on a package of changes to improve benefits for members. The proposed changes on which you’re being consulted are anticipated to require a combined contribution rate from members and employers of 20.6%. These are provisional results at this stage, and the final contribution rates will be confirmed later in the 2023 valuation process following the trustee’s determination of the overall contribution rate. 

The JNC is a body established under the USS rules and is made up of UUK and UCU representatives as well as an independent Chair. It is responsible for deciding how to address the overall contribution requirements and funding position of the scheme – through changes to benefits and/or contributions paid. 

The JNC’s proposed changes and improvements to benefits, would see the pre-April 2022 benefit structure re-introduced, with effect from 1 April 2024.   

For more information on the valuation, go to the USS website. You can also read more on the consultation website

What USS membership currently provides 

The defined benefit part of the scheme – the USS Retirement Income Builder 

When you join USS, you automatically join the USS Retirement Income Builder. This is the defined benefit (DB) part of USS. When you retire, it gives you a guaranteed income, based on benefits built up through contributions from you and your employer during your career. 

Currently, every year, you build up a retirement income worth 1/85 of your salary, up to the salary threshold. This threshold is currently £41,004. At the end of each year, your benefits are calculated and 'banked'. They are then increased broadly in line with inflation (subject to a maximum cap each year, currently 10% but this cap is set to reduce to 2.5% from 2026 and be applied to benefits built up from April 2022). 

When you retire, you will also receive a tax-free lump sum. This is worth three times your annual defined benefit (USS Retirement Income Builder) pension. 

There may also be benefits payable to your spouse or civil partner/dependant(s)/child(ren) after you die. 

The defined contribution part of the scheme – the USS Investment Builder 

If you earn above the salary threshold, have made additional contributions or have transferred in benefits from another pension arrangement since 1 October 2016, you’ll have savings in the USS Investment Builder. This is the defined contribution (DC) part of the scheme and it allows you to invest in one or more funds offered by the trustee. 

The amount you build up in the USS Investment Builder depends on how much both you and your employer put into it. It also depends on how well your investments perform, minus any investment charges. 

You can use your USS Investment Builder savings in various ways. These include as a tax-free lump sum, investing in a drawdown product or buying an annuity that gives you a guaranteed income for life. 

Any USS Investment Builder savings you have when you die will be paid to your beneficiaries as a lump sum. Currently, funds passed to your beneficiaries will be tax-free if you die before age 75 and they are paid out within a relevant two-year period (or taxed at the recipient's marginal rate (if paid to a qualifying person) if you die after age 75. 

Benefits payable on death or ill health  

USS members get valuable death benefits, which can include a lump sum of three times their salary and a pension for a spouse, civil partner, eligible dependants or eligible children. There are also benefits which will provide support if you become ill and have to stop working, subject to meeting the eligibility criteria. 


Previous valuation process

The Universities Superannuation Scheme (USS) has been through a valuation process – a statutory assessment of a pension scheme’s financial health, carried out at least once every three years. Stemming from this process, some changes to the scheme were implemented from April 2022.

All benefits earned from contributions to April 2022 are safe and are not affected.

Resources to help you understand the changes

Our principles 

To work for everyone involved, we believe the scheme should be: 

  • Fair: so it works for and is accessible to all potential members, regardless of age, background or career stage. 
  • Valued: so everyone sees and receives the benefit of it.  
  • Sustainable: so it continues to be affordable and secure for individuals and employers. 
  • Stable: so there’s confidence in it. 
  • Portable: so it helps colleagues move freely around the sector to develop their careers. 

Find out more

We share public information and links to other sources of information on this page and key information is also highlighted via the all staff eNews.

Scheme information, and member communications and documents are produced and provided by USS itself.

USS (runs the pension scheme)

  • USS.co.uk
  • USS 2020 valuation (this page hosts some video explanations, including ‘Valuations: how we protect the promises made to members’)

UCU (represents all scheme members)

UUK (represents scheme employers)

Your pension

If you have any specific questions relating to your pension scheme please contact the Pensions and Benefits team

Please rest assured that any pension benefits you already have in the scheme, to the date of any further scheme change, are safe and secure. Discussions about the future of the scheme relate to pensions yet to be built up. 
 

USS Latest News

Industrial action update from the Chief Operating Officer

An email from Rachel Brealey, Chief Operating Officer, sent to all staff on Tuesday 31 January.

USS Pension information session - Watch on-demand

Don’t worry if you missed our live event, you can watch the recording on demand at a time that suits you.

Book | USS pension information session

If you are a member of the USS pension scheme, join these information sessions hosted by pensions experts, Mercer.

Book your place | Leeds Conversations: Let’s talk

Join Vice Chancellor, Professor Simone Buitendijk, to have an open conversation about the USS pension scheme.

Let's talk | A message from the Vice-Chancellor

Email from Vice-Chancellor, Professor Simone Buitendijk, to all staff on Friday 4 March 2022.

The University’s position on UCU’s proposal to conclude the USS 2020 valuation 

A statement made on 23 February 2022

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