USS Pensions update
What you pay towards the USS Pensions scheme and what you get is changing.
Here's a summary.
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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%.
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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:
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Where inflation (currently CPI) is 5% or less, the increase will be matched.
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Where inflation is more than 5% but less than 15%, the increase will be 5% plus half of the percentage increase over 5%.
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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.
You can find out more on our USS Pensions In Depth page.
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