February 23rd, 2022
The Universities Superannuation Scheme (USS) Joint Negotiating Committee (JNC) has voted to implement the Universities UK (UUK) package of reforms to conclude the 2020 valuation of the pension scheme.
Employer and member contributions will be 9.8% of salary for members and 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.
The JNC’s decision was confirmed with the vote of the independent chair. The UUK proposals provide an affordable and sustainable solution to the 2020 valuation alongside opportunities to explore lower cost flexible options, alternative scheme designs, and a review of the scheme’s governance.
Without the changes passed by the JNC, pension scheme members could have faced contribution increases to at least 13.9% of salary for members and 25.2% of salary for employers. Instead, scheme members would avoid such increases, but see guaranteed defined benefits build up more slowly – with a reduction in the accrual rate from 1/75 to 1/85.
The salary threshold up to which guaranteed defined benefits are built up would reduce from £60,000 to £40,000 per annum. Members earning above the threshold would receive a 20% defined contribution into their individual pension pot.
University employers have already agreed to make significant financial commitments to the scheme, known as covenant support, equivalent to an additional £1.3 billion per annum to support the UUK proposals.
Following consultation feedback from USS scheme members which identified the proposed 2.5% cap on future inflationary increases as a 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.
93 out of 97 employers, including the University of Nottingham – representing more than 92% of the active membership of the scheme and over 98% of those responding by weighting – did not support the UCU proposal to conclude the 2020 valuation when consulted.
The decision of the JNC will now be considered by the USS Trustee in accordance with the formal processes under the scheme rules, and it will then confirm the changes that will be implemented to scheme members.
Commenting on the JNC’s decision. Universities UK said:
“The Joint Negotiating Committee’s (JNC) 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.
“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.”
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