October 8th, 2021
A series of resources have been published to help USS pension scheme members understand the changes that have been approved by the USS Trustee to avoid significant increases in contribution rates for members and employers:
A series of changes to the scheme have been approved by the USS Trustee to avoid significant increases in contribution rates for members and employers, whilst maintaining the scheme’s Defined Benefit /Defined Contribution hybrid model to provide members’ retirement incomes.
Without the changes, the USS Trustee would increase contribution rates for members by 12% in April 2022, followed by a further 17% in October 2022. This would mean a member earning £40,000 would pay an additional £860 in pension contributions in 2022 for the same benefits, with contributions set to rise further every six months until 2025.
To support the changes, university employers are making commitments to underpin the scheme’s covenant worth some £1.3 billion. Other reforms include commitments to explore alternative scheme designs, including conditional indexation; a major review of how the USS pension is governed; and the development of a flexible, low-cost option for lower paid members of staff.
Contrary to reports of cuts in member benefits of the order of 35%, figures published by the USS Trustee show that the changes would reduce the amount of pension members receive at retirement by around 10 – 18%, (or 7 – 15% when state pension is included). All benefits earned from contributions to date are safe and will not be affected.
The changes would still provide a good pension for staff at close to current contribution levels, with employers paying in more than two and half times the average contribution rate for FTSE 100 companies.
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