USS pension scheme – important update
23 Feb 2022
Universities Superannuation Scheme (USS) Joint Negotiating Committee (JNC) formally votes to implement package of reforms to pension scheme
The Universities Superannuation Scheme (USS) Joint Negotiating Committee (JNC) has formally voted to implement a package of reforms to conclude the 2020 valuation of the scheme.
Contributions will remain at 9.8% of salary for members and increase to 21.6% of salary for employers from 1 April 2022 – with guaranteed defined benefits remaining at the heart of the scheme. This represents an increase of 0.5% of salary in employer contributions, and 0.2% of salary in members’ contributions from the 2018 valuation.
This decision of the JNC will now be considered by the USS Trustee in accordance with the formal processes under the scheme rules.
Director of People and Organisational Development, Adèle MacKinlay said: “Our University welcomes the JNC’s decision. These necessary reforms provide an affordable and sustainable solution to the 2020 valuation and brings some certainty after a difficult period.
“We know how important the pension is to our staff – our most valuable asset – so it’s vital to us that the scheme provides appropriate retirement benefits and remains affordable and sustainable to all members.
“That’s why Universities UK and USS employers have been working hard to attain this affordable and sustainable solution for many months. We now plan to continue to focus on the scheme’s future in three important workstreams which include working with UCU involving exploring lower cost flexible options, alternative scheme designs, and carrying out a review of scheme governance.”
A Universities UK (UUK) spokesperson, commenting on behalf of all 340 USS employers, said: “The JNC’s decision secures an affordable solution to the 2020 valuation and provides a more sustainable platform on which the scheme’s longer-term future can be built. This settlement ensures the continuation of a valuable Defined Benefit element to the pensions offer while sparing both members and employers from the damaging consequences of much higher contributions from April.
“Employers would rather the scheme was in a financial position where benefit reform was not necessary. However, without these reforms costs would have risen to unaffordable levels for employers, while the increased costs for members would have seen more people leave the scheme and miss out on a valuable employer contribution towards their retirement. Today’s decision brings a considerable period of uncertainty to an end and gives stakeholders an opportunity to break the cycle of disagreement and dispute ahead of the next valuation.
“Too many members of staff are currently choosing not to participate in USS because the contribution rate is too high, or the scheme benefits are not considered suitable. With these reforms enacted, we have a chance to identify improvements and restore all members’ confidence in their pension arrangements at an affordable price.”
The JNC’s decision
Under the reforms passed by the JNC:
- Scheme members earning up to £40,000 per annum will see their guaranteed defined benefits (DB) build up more slowly – with a reduction in the accrual rate from 1/75 to 1/85. This is necessary in light of the increasing costs associated with DB pension provision.
- The salary threshold up to which guaranteed defined benefits are built up will reduce from c.£60,000 per annum to £40,000 per annum. Members earning above the threshold will receive a 20% contribution (8% member, 12% employer) into their individual pension pot (defined contributions) – something which staff who earn more than £60k per annum will already be familiar with.
Following consultation feedback from members which identified the proposed 2.5% cap on future inflationary increases as an issue of great concern, employers have agreed to pay an additional 0.2% of salary in contributions (on top of the 0.3% of salary increase which has applied from 1 October 2021) to defer the application of the cap until at least the next valuation. By then it is hoped that possible mitigations could be in place which could further delay or prevent the imposition of the cap.
Further information
You can see the recent USS update on the latest funding position and get further information at:
- USS – a two-minute read on what you need to know
- WATCH: Want to understand changes to your USS pension?
Our pensions news page also includes a contributions calculator to see how the changes will affect you and a glossary of terms.
You can also visit: