USS Pension Scheme: updated statement of principles

July 5th, 2021

The Russell Group of leading research-intensive universities has today published an updated statement of principles for the USS pension scheme agreed by all members of the Group.

The statement sets out the Group’s support for the UUK alternative proposals to maintain USS as a hybrid Defined Benefit /Defined Contributions scheme with no increases in contributions to the scheme by members, backed up by employers offering further, stronger covenant support measures.

The principles set out in the statement are as follows:

  • The decision by USS to offer a revised package that is broadly in line with current contribution rates is a positive and welcome step and means USS members and employers are not saddled with unrealistically high payments.
  • Now, we must work together rapidly to find a long-term solution that provides better value for money and does not place an unfair burden on future generations.
  • Exploration of alternative scheme designs, along with an independent governance review of USS, must begin immediately to identify a range of options that could be implemented ahead of the next scheduled valuation as well as improvements to how the scheme is run.
  • As part of efforts to find a sustainable solution and affordable benefits for staff, we agree to an enhanced covenant support measure where the metric trigger for pari-passu security would move to 10% of assets on secured future borrowing.
  • We hope this agreement and recent significant improvements in the economy will allow the 0.5% increase in contributions proposed by USS to be reduced or eliminated as we work to seek a resolution to the 2020 valuation.
  • Our determination to support our staff so they can enjoy their retirement is unchanged, as is our commitment to a hybrid scheme. We are not seeking to reduce what employers pay into pensions and we want more staff to be in the USS scheme so they can benefit from employer contributions. That is why the trustee must urgently prioritise the development of an additional low-cost alternative to give staff more options to stay in the scheme.
  • We recognise this is a challenging situation for our staff. We are working hard to find a solution that will provide a decent pension without contributions that are constantly increasing.
  • Our view remains that a pension scheme backed by a contribution rate of 30.7 per cent shared between employers and employees should be sufficient to provide a stable, comfortable income in retirement.
  • If, on the other hand, contribution rates continue to rise, more individuals will probably choose to leave the scheme and lose out on valuable employer contributions to their future retirement.

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