This is part of a regular series of communications over the next few months to update staff on the progress of the 2020 valuation of the USS pension scheme.
In this update:
- USS Trustee publishes report on cost of maintaining current benefits
- Vice-Chancellor’s response
- Universities UK’s response
- UCU’s response
- Potential next steps
- USS member webinar on valuation
- Staff information sessions with independent pensions expert
USS Trustee publishes report on cost of maintaining current benefits
The USS Trustee published a report on Wednesday this week, setting out the price of maintaining the current benefits of USS.
In it, the Trustee indicated that pension contributions would need to rise sharply to maintain existing benefits.
You can read the Trustee’s statement about its report on the USS website.
The report was communicated first, on Tuesday, to the Joint Negotiating Committee (JNC), made up of equal numbers of employer and member national representatives.
The publication of the report is an important step in the 2020 valuation process and triggers the next stage in the process.
The report had been delayed for three months while the Trustee held discussions with The Pensions Regulator.
A range of pricing scenarios have been set out by the USS Trustee. The upper end of the pricing range is around 56% of salary and the lower end around 42%. The current rate is 30.7% (21.1% paid by employers and 9.6% paid by employees).
Decisions on how to respond to the report are the responsibility of the JNC, acting on behalf of employers and members. In the next three sections, we look at what the two parties involved in the JNC – UUK and UCU – as well as our Vice-Chancellor, have said this week about the USS Trustee’s report.
Vice-Chancellor’s response
In his weekly email to all staff, Sussex’s Vice-Chancellor Adam Tickell described the report as “unmitigated bad news”. You can read the View from the VC in full on the staff web pages.
Universities UK’s response
UUK said this week that the “very high” pricing set out by the Trustee was unaffordable for employers and members. It said:
“The very high prices for current benefits put forward by the USS Trustee are unaffordable for employers, risk pricing even more staff out of the scheme, and undervalue the collective and enduring financial strength of the participating employers.
“Employers understand that the USS has a sizeable deficit and that a high number of staff on lower grades opt out because the contributions are too expensive for them. It is important that USS is designed so that people in early career can also access an affordable pension. This means it is vital that contributions to the scheme are affordable and sustainable for staff and employers alike and that reform is necessary.
“However, employers and scheme members need a stronger and clearer justification from the USS Trustee for the very high pricing decisions. Without this justification, employers and scheme members will be concerned that the scheme is facing an unnecessary level of reform.
“There has been a three-month delay in the USS Trustee confirming the price of current benefits, while it has had discussions with The Pensions Regulator. The USS Trustee has now set out higher prices than it previously thought necessary and it appears to be taking a more cautious approach than employers and our actuaries advise is needed.
“Employers and their staff need significant reassurance that the USS Trustee is not being overly prudent on matters like projected investment returns or undervaluing possible covenant support measures, both of which remain under discussion.”
You can read UUK’s full response on the USS Employers website.
UCU’s response
UCU said that the Trustee’s report “risks endangering a healthy pension scheme”.
You can read UCU’s full response on its website.
Potential next steps
UUK has said it will be holding further discussions in the days ahead with USS and The Pensions Regulator. They will be asking USS to publish clear reasoning for the much higher level of contributions it says are required, and to further consider the value of the significant measures that UUK, on behalf of employers, has illustrated to take to support a strong covenant.
While these discussions continue, later this month, UUK will consult all USS employers on the way forward to address the scheme’s high opt-out rate, the sizeable deficit and the substantially higher cost of future service benefits, including seeking views on covenant support measures, affordable benefit structures and contribution levels.
The USS Trustee has informed The Pensions Regulator that it will not be possible to complete the valuation by the statutory deadline of 30 June 2021. The current expectation is that the valuation process will not conclude until late 2021 or early 2022. This means that the cost of pension contributions will almost certainly rise in October (to 11% of salary for individual members with a University contribution of 23.7%).
USS member webinar on valuation
USS will be holding a webinar about the valuation for all USS members on Wednesday 10 March at 2-3pm. You can register your place on the USS website.
Staff information sessions with independent pensions expert
Around 50 members of staff attended the first of two webinars about USS with Rebecca Dodd, an independent pensions expert from Mercer.
The first session, on Tuesday 2 March, was recorded and will be shared with staff in next week’s This Is Sussex newsletter.
We are rescheduling the second webinar to allow staff the opportunity to attend the USS member webinar, which has been scheduled for the same time and date.
The Mercer session that had been due to take place on Wednesday 10 March will now take place on Monday 15 March at 2-3pm. If you had booked onto the original date, your booking will still be valid. Staff can register for the 15 March event now.
As well as answering questions, Rebecca will provide an independent overview of:
- USS benefits
- The current situation
- What happens next
The forum is open to any staff but will be particularly of interest to colleagues who are members or eligible to be members of USS.