USS update – employers back changes to the pension scheme

June 15th, 2021

Universities UK (UUK) has confirmed that employers representing 95% of USS membership have responded to the recent consultation on its alternative proposals to ensure a valuable, affordable, inclusive and sustainable scheme for staff for the long term.

The consultation confirms that employers would be willing to: make significant additional covenant support measures to secure the Defined Benefit part of the scheme; investigate the feasibility of conditional indexation; back a governance review of the scheme; and support a new flexible cost option for scheme members.

Without changes to the scheme, employers and scheme members face escalating contribution rates: for employers, from the current level (21.1% of salary) to 23.7% in October 2021 and at least 28.5% next year. Similarly, USS pension scheme members would see their payments rise from 9.6% of salary, to 11% in October 2021 and reach at least 13.6% next year – risking the pricing more and more members out of pensions saving.

UUK received 141 responses from employers to its recent consultation, outlining their support for the following package of reforms:

  • no increases in contributions to the scheme by member or employers.
  • maintaining the scheme’s Defined Benefit /Defined Contributions hybrid with changes at this valuation to keep contributions at the current level with a proposed salary threshold of £40,000.
  • employers to offer further, stronger covenant support measures including a moratorium on exit, debt-monitoring and ensuring that pension promises are even more secure through protecting the USS Trustee’s status as a creditor.
  • a commitment that should the scheme’s financial situation get better then improvements to benefits can be considered rather than reducing contribution rates.
  • addressing the high opt-out rate, which sees around 20% of members choosing not to join the scheme and losing out on the 21.1% employer contribution, by giving eligible members the choice of a new lower contribution option.
  • a major new review of the scheme’s governance.
  • work to begin immediately on developing proposals to explore a move to a conditional indexation model – which pegs a part of annual pension provision to the performance of scheme funds – through the suggested establishment of a joint member/ University and College Union (UCU), employers, and USS working group to collaboratively design a proposal.

These proposals will now be discussed over the coming weeks with the UCU, representing members, UUK, and USS at the Joint Negotiating Committee, which is responsible for approving any scheme rule changes and concluding the 2020 valuation.

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