Funding position of USS
02 Oct 2014
Potential changes to ensure the sustainability of USS
Information for members of USS (UMSS members are not affected)
At the time of the last valuation of USS in March 2011, the scheme had a sizeable deficit of £2.9 billion. In March 2013, this deficit was £11.5 billion and is expected to be around £8 billion as at March 2014.
Despite significant changes already having been made to the scheme – including from October 2011 the introduction of career average benefits for all new entrants with employer and employee contribution increases - the sizeable deficit remains volatile and persistent.
The University hopes that USS members understand that further change is needed to keep the scheme sustainable and affordable for employees and employers, both now and in the future.
The USS Joint Negotiating Committee (JNC) will consider proposals made and determine the benefit changes to be made.
USS remains an excellent pension scheme and the task of all the parties involved in the negotiations at the JNC – UCU and the employer representatives, plus the independent chair - will be to ensure that necessary reforms to the benefit structure are agreed while delivering an attractive, affordable and sustainable scheme for future and current employees and for employers.
Without changing the benefit structure of USS, it will not be possible to address the deficit and the resulting inevitable contribution increases for both members and employers would be at a level which is simply not affordable for either. This is not a cost-reduction exercise; even with the potential changes to pension benefits being explored, the employer contributions to USS on your behalf are expected to increase significantly above the current level of 16% of salary. The University of Manchester has also indicated its willingness to support an increase in employer contributions up to 18%.
Possible benefit changes
The approach to benefit changes that is being explored by employers is based on an extension of the current career average benefits section to all active members and the closure of the final salary section, i.e. putting all members into the same benefit framework for their future service.
The benefits a member has built up before the date that any changes are implemented will be protected and will be calculated based on their service and pensionable salary at the date of change, subsequently increased in line with changes in the Consumer Prices Index. You can find out more about the proposed changes at:
UUK, working with the Employers Pensions Forum, is examining a hybrid benefit arrangement for future service which would aim to deliver a balanced and fair pathway for all scheme members. Details of the proposed benefit changes that will be submitted to the JNC in the autumn have not yet been finalised.
Process
The approach to potential benefit changes is still being developed following the recent consultation with participating employers. The outcome of this consultation with employers will shape the proposal that the employer representatives will submit formally to the JNC later this autumn. The JNC consists of an equal number of employer and UCU representatives and the employers are committed to continuing dialogue with our UCU colleagues in the period leading up to the JNC decision on future scheme benefits changes to be proposed to members.
Once that decision is made, as is required by law we, as your employer, will consult with you about the scheme changes which have been proposed by the JNC, and your views in that consultation will be taken into account by the JNC and the USS trustees before any final decision is made.