The following Q&A has been put together to address the questions and concerns that colleagues have been raising about the recent USS Interim Monitoring Statement.
On 2 March 2022, the USS Trustee confirmed that the recommendations for concluding the 2020 USS valuation, formally approved at the JNC in February 2022 would be implemented from 1 April 2022, with one modification.
After taking on board feedback from the employer consultation with members and representatives, the JNC recommended to the trustee a delay to the reduction to the inflationary cap on pre and post retirement increases on benefits in the Retirement Income Builder accrued on and from 1 April 2022, up to and including 31 March 2022 and the increases to be applied to those benefits on the 1 April 2022, 1 April 2023 and 1 April 20202. The contribution rate for members will remain at 9.8% from 1 April 2022.
All other proposals remained unchanged.
A formal consultation took place with USS employers on the UCU’s alternative proposal to complete the 2020 valuation. The consultation asked employers to confirm whether they would provide the necessary covenant support and additional costs associated with the proposal which USS employers declined due to current contribution rates being at the limit of affordability and sustainability. Paying more would have a significant and detrimental impact on the sector’s collective ability to deliver high quality education and research. Details of the proposal can be seen on the USS employers and the UCU website.
The consultation period has now ended. Responses submitted by affected employees, elected representatives and recognised trade unions during the consultation period will be considered by the Trustee, before a decision is taken as to whether or not to implement the final changes. The final position will be communicated from February 2022.
An update on the progress on the three workstreams coming out of the 2020 USS valuation has been received and information can be found on the National negotiations page.
On 1 November 2021, a 60-day consultation opened with affected members of USS and their representatives to seek comments on the JNC’s recommended changes to the scheme. The consultation ended at 17.00 on 17 January 2022 with any changes likely to take effect from 1 April 2022. If agreement isn’t reached, then significant increases in contribution rates are due to be put in place for both members and employers.
Ahead of the consultation, which begins on 1 November, a formal statutory notice was issued to active members of USS, those who are eligible to join the scheme and their Trade Union or Staff representatives. The notice set out the proposals in full.
What the JNC has proposed
In order to address concerns over the scheme’s sustainability without resorting to large contribution increases, from 1 April 2022:
Each year members will build up a pension in the USS Retirement Income Builder (the defined benefit section of USS) at a lower rate of 1/85 of salary compared to the current 1/75 of salary; and a separate lump sum of 3/85 rather than 3/75, up to the Salary Threshold.
The Salary Threshold will reduce from £59,883.65 to £40,000, and from April 2023 will continue to increase annually in line with official pensions. This will be in line with the Consumer Prices Index (CPI), but subject to a lower maximum increase of 2.5% a year until 31 March 2025 (or earlier if agreed by the JNC following review)
Benefits earned in the USS Retirement Income Builder will continue to see increases applied annually before and after members retire, but subject to a lower maximum of 2.5% a year.
There will also be a change of benefits for those who are members of USS for a short period (more than three months but less than two years).
Full details of the proposals can be viewed on the USS webpages.
What this would mean for staff
Pensions built up before 1 April 2022 are safe and can’t be changed. Only future benefits will be affected.
If this approach is taken forward, member contributions will remain at 9.8% as introduced on 1 October 2021. Employer contributions will remain at 21.4% of salary. You will also continue to have life cover and ill health retirement benefits.
USS has produced a series of short videos to show how the proposed changes could affect you if they go ahead. They’re based on different salary bands. Choose the video that’s closest to your salary.
The USS consultation website also contains a modeller to help you better understand the impact on your future benefits.
Details of the local consultation process will be updated on our dedicated webpage.
Find out more
At our December staff webchat, our Chief Financial Officer, Jane Higham, gave more information about the valuation and the lead up to the consultation and was joined by Rebecca Dodd, from Mercer, pensions advisers.
Information from a previous staff webchat on 13th October 2021 can be viewed here.