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USS FAQs

28 May 2021

FAQs on the USS changes.


    You can also catch up on our webinar below for more on what the USS dispute is about, the employers' response and how you can support our action.


    What is the USS dispute about?

    The Universities Superannuation Service (USS) pension scheme conducted a valuation in 2020 and claims that contribution rates need to increase very significantly from the rate of 30.7% of salary (9.6% for members, 21.1% for employers) established under the 2018 valuation.

    Both UCU and the employer representative, Universities UK (UUK) argue that these increases are not necessary and have not been properly justified. However, instead of continuing to challenge the increases, UUK has pushed through major changes and cuts to the guaranteed, defined benefit (DB) element of the scheme to prevent employers from having to pay significantly higher contributions.

    The UUK cuts will drastically reduce the level of guaranteed retirement income provided to members of USS in return for their future service (benefits already built up will not change). They will affect every active member of USS but especially those nearer the start of their careers.

    These proposed cuts come in the context of a decade of detrimental changes to USS contributions and benefits. As UCU has shown, the changes that have already taken effect between 2011 and 2019 will make a typical member of staff £240,000 worse off over the course of their career and retirement. The cuts from UUK will make things even worse.

    Update, 21 February 2022: The funding update from USS shows that the deficit on which the cuts to our pensions are premised has shrunk by around 80% whilst the scheme's assets have soared to around £90bn. For UCU's reaction click here.

    Update, 22 February 2022: In the meeting of the joint negotiating committee  (JNC), where staff and employer representatives negotiate USS pensions, employers formally voted in favour of their package of cuts. UCU's compromise proposals, which would have replaced UUK's cuts, were rejected by both UUK and JNC chair Judith Fish, who had the casting vote in a tie. For more details click here.

    Update, 31 March 2022: UCU demanded vice-chancellors order their employer body UUK to revoke brutal cuts to pensions after a drastic improvement to the USS finances was revealed by the trustee. Under pension proposals, set to come into force on Friday 1 April 2022 and supported by vice-chancellors and UUK, the typical staff member is set to lose 35% from their guaranteed retirement income. Employers say this is justified after a deficit was reported in the scheme when it was last valued in March 2020 as markets were crashing due to the pandemic. However, a new report by the trustee which manages the scheme, has reported assets increasing to over £88bn. The trustee says that growth has outstripped liabilities and that the level of contributions required to service the deficit--has now fallen to 0%. For further details click here.

    What exactly will happen to my retirement benefits when Universities UK's cuts are implemented?

    Universities UK and individual employers have not given staff meaningful information, including personalised information relating to their circumstances, about the impact of the UUK proposals. To fill this information deficit, UCU's actuarial advisers, First Actuarial, developed a modeller that allows you to compare the retirement benefits you would build up under the UUK proposals with the benefits you would build up if the scheme stayed as it currently is.

    You can access the modeller here.

    The modeller indicates that a typical USS member at point 37 of the current higher education pay spine (the starting salary for lecturers in many institutions) would suffer a 35% cut to the guaranteed retirement benefits which they would build up between the projected date for implementation of the proposals and their retirement (assuming they retired on their 66th birthday).

    These cuts could be partially offset by an increase in the one-off defined contribution lump sum received by the same member, but the overall cut would still be 20-25% and unlike defined benefits, the defined contribution lump sum would not be guaranteed - its size would depend on how USS's investments perform.

    See also the FAQ below on the USS modeller.

    The official modeller provided by USS Employers (now offline), which took into account of the benefits already accrued, revealed a similar - if not deeper - level of cuts compared to UCU's modeller. There is also another modeller, developed independently by UCU members at the University of Bristol who are not affiliated in any way with USS.

    My employer says that they are going ahead with these cuts because UCU failed to propose an alternative in negotiations. Is that true?

    That is not true. UCU's elected negotiators and professional actuarial advisers developed a set of fully costed alternative proposals for addressing the 2020 valuation, which USS confirmed could be implemented.

    The UCU proposals sought to preserve as much of the benefit package as possible while reducing members' contributions. The UCU proposals also included important new mechanisms to allow lower paid and casualised staff to join the scheme at little or no cost to themselves and build up a defined benefit pension with the same level of security as other members.

    However, the UCU proposals did not proceed to a formal vote of the USS Joint Negotiating Committee (JNC), because employers refused to provide as much 'covenant support' (essentially, willingness to stay in the scheme and accept constraints on the amount of debt they can take on) for the UCU proposals as they provided for their own proposals.

    Employers also refused requests from UCU to delay the decision-making process to provide more time for employers and UCU members to be consulted fully on potential alternative resolutions.

    On 26 January 2022, UCU has issued a set of new USS pension proposals aimed at averting widespread industrial action across UK campuses in February and beyond. The new proposals would see retirement benefits protected in return for a small increase in contributions for both members and employers ahead of a new 'evidence-based valuation' of the scheme. Click here for details of UCU's proposals. In the February 2022 JNC, employers formally voted in favour of their package of cuts. UCU's compromise proposals, which would have replaced UUK's cuts, were rejected by both UUK and JNC chair Judith Fish, who had the casting vote in a tie. For more details click here.

    How can the dispute be resolved?

    UCU members want employers to revoke the massive cuts which they are imposing on members of the USS pension scheme. Once those cuts have been revoked, employers must negotiate an alternative resolution to the 2020 valuation with UCU.

    Any agreement must protect members' benefits as far as possible and ensure that lower paid and precariously employed staff can afford to join the scheme at an affordable contribution rate.

    UCU also wants UUK to support our call for USS to conduct a new, moderately prudent, evidence-based valuation as soon as possible. It is clear that the 2020 valuation is not an adequate basis for a long-term resolution of this dispute. To resolve the dispute, UCU members need to be confident that future valuations will be realistic reflections of the underlying strength of the scheme and the higher education sector, and that members' contribution rates and benefits will return at least to the level they were at before the current dispute.

    Can employers afford to pay more to protect members' benefits?

    Yes. Employers currently contribute 21.4% of salary, but USS itself has determined that employers can afford to pay a 24.9% contribution rate on a long term basis. USS's view has been informed by research by their external professional advisers into institutional finances.

    The higher education sector's income has comfortably outstripped every measure of inflation over the past five years, while the proportion of money spent on staff has become lower than ever. The pre-92 universities that are the main sponsors of USS are in a particularly strong position and have no excuse not to pay more to protect staff retirement benefits.

    My employer is talking about 'conditional indexation' as a potential long-term solution to this dispute. What does this mean?

    Conditional indexation is better described with the term 'conditional benefits'. This arrangement would involve more risk for members' retirement benefits than the current defined benefit arrangements, but less risk than defined contributions (DC). Under the right circumstances it could involve lower contributions and higher benefits, but whether that is a likely outcome is far from clear at this stage.

    With conditional benefits, a USS member would accrue a minimum defined, ie guaranteed benefit, but that benefit would only increase in line with inflation if the scheme continued to perform well enough financially (until the member enters retirement, at which point the law ensures that there is protection against inflation up to 2.5% regardless of the scheme's performance).

    Members at UCU's higher education sector conference (HESC) have voted to mandate UCU's negotiators to explore conditional benefits via talks with UUK and USS, but it is too early to say whether it could be a solution to this long-running dispute or a superior alternative to DB. Ultimately no agreement will be entered into without full democratic consultation of UCU members.

    We've taken industrial action over USS before and it hasn't worked. Why would it work this time?

    If UCU members had not taken industrial action in the past, we would not today have any guaranteed pension to defend. No union in the UK has got as far as UCU in defending a good, defined benefit pension through multiple industrial disputes. By voting and taking action in large numbers in 2018 and 2019-20, UCU members stopped employers from closing the defined benefit element of the scheme, forced them to pay more to preserve defined benefits, and forced them to work with us more than ever to achieve a good outcome.

    Your industrial action has always strengthened the union's hand in negotiations and put your negotiators in a better position than they would have been in without it. The stronger the turnout in any industrial action ballot and the higher the participation in any action, the better the chance of achieving victory in this dispute.

    What can be done to make USS more affordable for low paid and casually employed staff?

    With contributions currently at 9.8% of salary for members, USS is already an expensive scheme. The final report of the Joint Expert Panel (JEP), convened by UCU and UUK after the 2018 industrial action over USS, concluded that the rate of eligible staff opting out of USS was worryingly high and steps should be taken to address it.

    The JEP proposed options for addressing the opt out rate that would make the scheme cheaper for low paid staff while giving them the same level of retirement security as every other scheme member by providing them with defined (i.e. guaranteed) benefits. UCU is committed to exploring options like this and finding ways to make them work for members.

    However, instead of honouring the proposals made by the JEP, UUK came up with a different 'solution': creating a separate scheme which would involve significantly lower contributions from employers as well as members.

    This option would be defined contribution (DC) only and provide no guaranteed retirement income whatsoever. It will lead some staff away from the main DB scheme. Because the DB scheme benefits from having a steady stream of new members generating contributions, it would also have a knock-on effect of undermining the main DB scheme. UCU is strongly opposed to this option just as it is opposed to the cuts to the main DB scheme from UUK.

    Isn't the real problem with USS and/or The Pensions Regulator, not our employers?

    USS's decision making and the role of The Pensions Regulator (TPR) in encouraging damagingly high contribution rates have been criticised by UCU, UUK, both parties' professional actuarial advisers, and the Joint Expert Panel (JEP). Neither USS nor TPR has fully recognised the unique strength of the scheme and the sector that underpins it. UCU is engaged in extensive lobbying and other campaigning efforts to influence both USS and TPR's decisions about the valuation and that will continue over the coming months regardless of what happens in negotiations.

    However, Universities UK has chosen to respond to USS and TPR's insistence on high contribution rates by proposing cuts that can be avoided and must be opposed. UUK's proposals are an extremely poorly advised kneejerk reaction to USS's demands and they should be withdrawn while both parties take time to reach a fair and stable long term solution.

    Can we take legal action against the USS Trustee?

    UCU has recently taken steps towards potential legal action over the 2020 USS valuation. On 25 October 2021 the general secretary wrote to the Chief Executive of USS, Bill Galvin [405kb], setting out concerns about the integrity of the 2020 valuation process. Those concerns are based on advice provided to UCU by a QC specialising in litigation and advice relating to pensions and trust law more generally.

    UCU believes that USS may have failed to comply with its own scheme rules in the course of the 2020 valuation, by:

    • failing to provide a formal determination on actuarial advice and following an actuarial investigation, that an increase in the aggregate contribution rate is required
    • providing three different potential increases to the aggregate contribution rate, rather than a single figure.

    UCU's letter asks USS to pause the 2020 valuation process and apply to the High Court to review its decisions and provide some independent scrutiny of what USS has done, unless we can agree a resolution to the issue. 

    If necessary, USS should remedy any failures of compliance with its own rules. What form this remedy takes will depend partly on the response of the High Court, but it could involve the USS Trustee's having to review and re-take its decisions about the aggregate contribution increase required.

    If the action which we are taking succeeds, it could give our negotiators more time to reach an acceptable resolution to the valuation with employers. It may also lead to a more reasonable and evidence-based assessment by USS of the contributions required to secure members' benefits. However, it is unlikely to lead to a full-scale overturning of the 2020 valuation and the overly pessimistic view of the scheme's health that underpinned USS's demands for higher contributions (or benefit cuts).

    UCU is committed to pursuing its concerns about the 2020 valuation as far as possible, but it is important to understand that legal action cannot be a substitute for industrial action to defend the immediate threat to members' pensions posed by the massive cuts which employers are implementing. We are taking this action now because we believe that the two approaches are complementary rather than mutually exclusive.

    The First Actuarial modeller only illustrates benefits for future service, not past service. How can I get a full overall picture of what my pension will look like under the UUK changes?

    It is not possible for a non-USS modeller to tell you what you benefits are for past service and illustrate benefits for future service, because that would require direct access to USS's data for you. However, you can easily work this out yourself by adding the figures in your annual statement from USS to the modeller outputs. The modeller text instructs you on how to do this:

    Benefits earned prior to the date of any change will be unaffected and are excluded from the modeller. To find out about any benefits you have already earned as a USS member, consult your annual statement from USS. The statement is posted to you and can also be found online.

    It is particularly important to use the modeller if you are an early career member of staff, because you will have accrued relatively little (or zero) benefits for past service already - so the modeller will give you a more complete picture of the overall cut to your benefits, which will be very severe.

    USS also released a modeller of its own, as part of its statutory consultation of members on the changes which employers are trying to make to USS.

    Unlike UCU's modeller, the USS modeller is able to take past service as well as future service into account, because USS has access to members' personal data about their past service in USS.

    Because the USS modeller can include benefits you have already built up as well as those you would build up from April 2022, it is likely to provide a higher figure for your total benefits than UCU's modeller.

    The USS modeller is only accessible to people who are currently active members of USS. Anyone who is not currently an active member can continue to use the UCU/First Actuarial modeller.

    However, the USS modeller's assessment of the impact of employers' cuts on the benefits you build up in future is very similar to UCU's modeller and in some respects it is even more pessimistic.

    How reliable are the modeller's overall projections of benefits?

    As the notes point out, the modeller is best for comparing the 'current' and 'proposed' scenarios rather than providing an 'objective' illustration of future benefits. This is because any projection of future pension benefits relies on a number of assumptions that could vary: about future salary increases, about economic growth, about how people choose to invest any defined contributions, and so on. However, the assumptions underpinning this modeller are the same in each scenario, both 'current' and 'proposed', which means that even if future events differ from what is assumed, they still make for a reliable comparison.

    There is one exception to this, where an assumption has been made that decouples the 'current' and 'proposed' scenarios from each other and could lead to a larger or smaller gap between them than will actually be the case. This is the assumption regarding inflation. Because the UUK proposals cap protection of defined benefits against CPI inflation at 2.5% (note February 2022: the UUK cap of 2.5% will apply from 2025), the extent to which the 'proposed' scenario falls short of the 'current' one will depend partly on how much inflation occurs in future and when. The more time inflation spends above 2.5%, and the higher it goes, the worse off members will be under the UUK proposals compared with the current arrangements.

    The particular assumption which First Actuarial has adopted regarding inflation does have an impact, but is arguably closer to the more conservative end of the spectrum of possible inflation assumptions. The real impact of inflation in the 'proposed' scenario could be worse than is currently projected.

    On the whole, the assumptions used by First Actuarial are fairly typical of the actuarial profession and could not easily be disputed by USS or employers. For instance, the assumptions which they have used for the likely return on defined contributions are the same as USS's. (This means that if USS's assumptions regarding returns on DC are over-optimistic, the 'proposed' scenario could be worse still for most members - because most members' benefits will depend more on DC returns in the 'proposed' scenario than they do in the 'current' scenario.)

    While the modeller illustrates big cuts to my DB pension and DB lump sum, there is also a big increase to my DC cash lump sum. How can I compare these cuts and increases directly to see the overall impact?

    The modeller outputs will always show a significant cut to the DB annual pension and DB lump sum, but for some members this will be partially offset by an apparently significant increase in the DC lump sum which they receive on retirement. If this applies to you, you may wish to evaluate the impact of this increase to DC, and the best way to do this is by seeing what you could get if you converted that DC cash into an annual pension.

    The text accompanying the modeller explains how to do this.

    You may wish to make a direct comparison between the amount you are projected to lose annually in your defined benefit pension, and any amount you may be projected to gain in your DC Investment Builder cash.

    When you do this, you will find that the pension supplement provided by converting your extra DC cash does not come close to compensating for the initial cut to the DB annual pension illustrated by the modeller. For instance, if you are 37 years old and on point 37 of the pay spine (£41,526), you find that a 35% cut to your annual pension is still a 23% cut after all your extra DC cash has been converted. Meanwhile, the 35% cut to your DB lump sum remains in place.

    You should also bear in mind that this DC cash is not guaranteed, unlike the DB pension and DB lump sum. So if you happen to fall short of the illustrated DC amount when you reach retirement, the amount of annual pension you will be able to convert it into will be correspondingly lower.

    As well as cuts to defined benefits, the UUK consultation proposals also included the creation of a separate, DC-only scheme aimed at lower paid staff. Why isn't this in the modeller?

    The UUK consultation document did not settle on one specific contribution structure for the DC-only scheme which it put forward - instead, it aired a number of different possibilities, ranging from a 4% member/8% employer structure to a 6%/6% one and even a tiered structure with employer contributions increasing in line with member ones from 4%/8% to 8%/12%. If and when UUK formulates a specific proposal to take to the USS Joint Negotiating Committee (JNC), that proposal can be modelled by First Actuarial.

    Last updated: 25 July 2022