Universities Superannuation Scheme (USS) is one of the largest principal private pension schemes for universities and other higher education institutions in the UK.

A valuation must be carried out at least every three years by law. At the last valuation date (31 March 2018), the USS Trustee confirmed that the USS scheme had a deficit which legally needed to be addressed. 

Universities UK (UUK), who represent over 350 USS employers, has been negotiating with the University and College Union (UCU), who represent the scheme members, over changing the scheme since January 2017 given the funding challenges it faces. 

The 2018 valuation resulted in a schedule of contributions set out below. This schedule remains in place until a further valuation is completed. 

 1 October 2019 1 October 2021 
 Member contribution   9.6%   11% 
 Employer contribution   21.1%   23.7% 
Summary of the table's contents

The increase in contributions, outlined above, were part of the Trustees recovery plan submitted to The Pensions Regulator to address the schemes shortfall in funding of £3.6bn. 

Work on the 2020 valuation has already commenced and is expected to show that the schemes shortfall has risen from £3.6bn.  

We are acutely aware of the strength of feeling on the ongoing pensions uncertainty and the impact it is having on our community. We are listening to your views, and your input has played an important role in shaping the College’s response to the situation to date. 

We will continue to advocate for openness and transparency from all parties involved in the national discussions, and to press for decisions based on evidence that is available to everyone.  

We will continue to work with you on an overall College remuneration package that is fair and sustainable. 

You can find out more about the parties involved on our glossary page. 

What is an actuarial valuation?

What is an actuarial valuation?

A valuation is a financial health check of a pension scheme. It is a check to make sure the money it currently has, and the contributions being paid in by employers and employees, are enough to pay the promised pensions in the future. A valuation must be carried out at least every three years by law. 

Firstly, the Trustee must assess the strength of the 350 employers that back USS - this is known as the covenant. The Trustee needs to know how much it can rely on these employers now and in the future as this will affect what they can invest the scheme’s money in. They need to take many factors into consideration including how an employer might be affected by an economic downturn, global events e.g. COVID-19, levels of employer debt, and student numbers. The stronger the covenant strength, the more investment risk the Trustee may take, as any shortfall can be assumed to be covered by the employer. A downgrading of covenant strength would mean less chance of relying on the employer and, therefore, less risky investment decisions. 

Then, the Trustee, supported by a specialist called an actuary, looks at all the pensions and lump sums they have promised to pay - these are the scheme’s liabilities. In order to do this the scheme will use the membership data which shows the age, gender, length of membership and salaries of members. They will then estimate how the liabilities will increase in future in line with inflation, and how long pensions will be paid for (which depends on how long people will live for), and how the scheme’s investments will perform in future.  

This tells the Trustee how much money they should currently have in order to be confident of being able to pay all the promised pensions. When they do this, they are legally required to be prudent – to make assumptions that are expected to overestimate the amount they need now. How prudent they are will depend on their view of the strength of the employers. This assessment gives a value of the liabilities at the valuation date. 

This liability value is then measured against the current assets to assess the funding level. The assets are where all the scheme's funds are invested. These might include investments in the stock market, bonds, hedge funds and money directly invested in commercial property, infrastructure and transportation. If the assets are lower than the liabilities, then the scheme has a funding deficit. If the assets are higher, then the scheme is in surplus.  

They’ll also look at the pensions that will build up in the future (for members paying in now and in the future) to ensure that the contributions will also be enough to meet the promised pensions as they build up. If there is a mismatch, then contributions may need to be increased or the pensions that build up in the future may need to be reduced. 

The whole process may take several months and requires the Trustee to consult with UUK, who act on behalf of the employers. The employers will be asked to consider the assumptions the Trustee is using and the level of risk the scheme takes on and will need to agree to a recovery plan if it's found the scheme is in deficit.  

The recovery plan will need to set out how and for how long any extra contributions will need to be made for. The recovery plan also needs to be accepted by The Pensions Regulator. 

The employers will also be asked to agree to the rate of contributions needed to pay for future pensions.

Latest consultations

The Joint Expert Panel (JEP) published their second report (known as JEP2) on 13 December 2019. It makes recommendations about the valuation methodology - the assumptions used to determine the financial state of the scheme and the contributions of employers and employees needed to sustain the scheme.

UUK consultation on JEP2

In January 2020, UUK consulted with USS employers on their views on the second report of the Joint Expert Panel (JEP2) and how its recommendations might be applied to the 2020 valuation. You can view the College’s response to this consultation and UUK’s response to the JEP2 consultation.

USS 2020 valuation discussion

USS asked for comments on their  Valuation Discussion  document and the direction of travel they are taking for the 2020 valuation. View the College's response.

USS debt monitoring consultation (2018 valuation)

We submitted our response to the USS debt monitoring consultation on Monday 3 August - part of the 2018 valuation. View our response.

USS 2020 valuation consultation (technical provisions)

On Monday 7 September, USS published a consultation to their 341 Higher Education member institutions on their proposed assumptions for the pension scheme’s Technical Provisions in relation to the 2020 valuation. Access the consultation document [pdf]. In this document, the USS Trustee has set out their initial view on the assets, liabilities, long-term assumptions and the cost of the current benefits structure. 

UUK have now shared some further analysis of these consultation materials [pdf] produced by AON, their independent actuarial advisers. We have reviewed the AON advice and will consider this as part of our response to the consultation.  

On 15 October 2020, Imperial's Provost Professor Ian Walmsley met with USS representatives, along with our Director of Finance Tony Lawrence, and our internal experts Professors Richard Craster, Axel Gandy and David Miles. We raised a number of questions about the valuation, including why the current consultation doesn’t encompass all aspects of the valuation process, the accommodation of only some of the JEP recommendations, and whether the asset modelling approach is appropriate in technique and time horizon. You can view a summary of the USS meeting [pdf] and further details of the Q&As discussed [pdf].

Taking into consideration the information provided by UUK and the discussions with USS, we shared a draft response to the consultation [pdf] with our community. Based on the feedback received from staff and discussions held by the Provost's Board, the Provost submitted our formal response to the USS consultation [pdf] on 30 October.

2020 valuation timeline

Please note that the dates outlined below are subject to change. We will keep the College community updated as the valuation progresses.

August-October 2020

The USS Trustee will consult with UUK on the financial and demographic assumptions and methodology it proposes to use for the valuation. They will also consult on the recovery plan. This is needed to address how the funding deficit will be repaired. UUK will seek views from employers like Imperial.

USS will inform the Joint Negotiating Committee (JNC) of the overall contribution rate needed to provide future pensions based on the actuarial assumptions. They will also confirm what level of deficit repair contributions are required in the recovery plan.

November 2020

At the end of November the USS Board will meet to finalise the valuation. USS will inform the Joint Negotiating Committee (JNC) of the overall contribution rate needed to provide future pensions based on the actuarial assumptions. The JNC have three months to consider the results.

December 2020 - February 2021

If the JNC decides to make any changes, or cannot reach a decision, this is when employers might need to prepare for a consultation with affected employees.

30 June 2021

The valuation must be submitted to The Pensions Regulator by the statutory deadline of 30 June 2021.

October 2021

This is when contributions are scheduled to increase under the 2018 valuation. This may change depending on the outcome of the 2020 valuation.


Accessible documents

Some of the downloadable documents linked to on this page are not accessible. For accessible versions, please contact hrpolicy@imperial.ac.uk.

Updated 30 October 2020