2020 valuation

Working alongside Universities UK (UUK), who represent over 350 USS employers, and University and College Union (UCU), who represent the scheme members, USS is currently undergoing a valuation. 

Valuations are necessarily complex. A valuation aims to assess how much money a pension scheme currently has, what it may have in the future and whether this is enough to pay the benefits that have been promised to its members and their dependants. This is impacted by changeable market conditions over time, as well as historical and demographic factorsYou can learn more about what a valuation entails in our explanatory section.

Where we currently are

After providing an initial proposal that - amongst other impacts - would result in considerable contribution rate increases, the USS Trustee considered an alternative proposal submitted by UUK. In September, this alternative proposal was endorsed by the Joint Negotiating Committee. In summary, this alternative proposal commits USS to:

  • Minimising the increase in contribution rates to no more than a 0.2% increase for employees and a 0.3% increase for employers.  
  • Exploring introducing a new, lower-cost contribution option for newer members. 
  • Launching a major review of the scheme’s governance and structure, which will include investigating the implementation of a conditional indexation model. This review would be undertaken by representatives of employees, employers and USS. 
  • Maintaining the valued Defined Benefit/Defined Contribution hybrid model (with Defined Benefit applying up to a salary threshold of £40,000 with 1/85 accumulation rate and retaining Defined Contributions at an overall 20% of salary above that threshold). 
  • Should the scheme’s financial outlook improve, benefit improvements will be considered in turn.

We are pleased that this decision avoids the need for significant increases in contributions from employees and employers. 

The commitment to a review of the scheme’s governance and structure echoes the College's position throughout this valuation:

College's position

Pensions should provide value for money for members

For the contributions we all provide, you deserve to be able to enjoy a comfortable retirement with a reliable pension, and the College is wholly committed to continuing to pay 2/3rds of your monthly pension contribution. We are also very supportive that everyone is able to take up a College contribution – we are not seeking to reduce what we pay into pensions. Further, it seems likely that in the short term we will face an increase in the overall contribution rate to resolve the immediate challenges USS faces. However, short-term solutions will only provide short-term relief.

The USS pension scheme needs a more sustainable footing

The price for current benefits is increasing at an unsustainable rate. The question we’re all faced with is whether the structure of the USS pension scheme is set up in a way to provide sustainable value for money in its current form without placing an undue burden on future generations. With a balanced approach to risk sharing, we believe there is a way to get you the same, or even better level of pension income, for a better price.

Maintaining a hybrid scheme is key

Any changes to USS must include both a Defined Benefit and Defined Contribution component. We have heard from you about the importance of this, and we will argue strongly for it. We also believe this should include a lower cost, more flexible alternative as part of USS to give members a more attractive, affordable, and sustainable option.

Consultation on proposals

In order to implement these proposals, USS is undertaking a short consultation with UUKThe consultation is on the proposed recovery plan [pdf] for responding to the deficit assessed by the USS Trustee as at 31 March 2020, and on a revised Schedule of Contributions [pdf] effective from 1 October 2021. The USS Trustee is also consulting on the Statement of Funding Principles [pdf] at the same time.
 
The consultation will close on Monday 20 September 2021. Please send any feedback to provost@imperial.ac.uk by next Friday 17 September.