Dear Colleagues,

This week we received the consultation materials from Universities UK (UUK) on the 2018 USS pension scheme valuation. We are writing to share these with you and to set out our approach to the consultation and how you can contribute your ideas and input.

Following the conclusion of the 2017 valuation USS are now consulting with UUK and employers on the 2018 valuation with a deadline of Wednesday 14th March. We appreciate this is a very short timescale however, we need to work within this to avoid a significant increase in employer and employee contributions in October this year that will otherwise follow as a result of the 2017 valuation.

The 2018 valuation includes USS’s consideration of the report of the first Joint Expert Panel (JEP) report. On initial review, we welcome the move to align to the JEP proposed contribution rate and the work that has been done to find an outcome that could be acceptable to all parties. You can find a summary of the consultation and our approach below and the full set of information from UUK/AON is attached to this email and available on our USS webpages.  

Over the coming week we will analyse the UUK proposals to prepare our response. To help us with this we are holding meetings with Heads of Department, UCU representatives and we invite you to send your feedback to provost@imperial.ac.uk by the end of Friday 8th March. We will circulate our proposed response to you all by the end of Monday 11th March so you have time to review before a staff meeting at 12.30 on Tuesday 12th March in the Reed Lecture Theatre at the South Kensington campus. This will be a final opportunity to discuss the response before it is submitted by close of play the next day and published on our USS webpages.

The pensions webpage link has all the latest information and modellers to help you assess the potential impact on your pay if the changes proceed.  

If you have a question that is not covered by the information provided here or on the webpages, please do let the pensions office know or contact us directly.

Best wishes

Alice and Ian

Professor Alice P. Gast, President

Professor Ian Walmsley, Provost

 

Summary of UUK consultation and College approach

USS have confirmed that the 2017 valuation, which was finalised before consideration of the recommendations of phase one of the JEP, is now closed and has been submitted to the Pensions Regulator.   Under the 2017 valuation the employer and employee contributions will increase as follows:

Effective date

Employer contribution

Employee contribution

Total

1 April 2019

19.5%

8.8%

28.3%

1 October 2019

22.5%

10.4%

32.9%

1 April 2020

24.2%

11.4%

35.6%

USS are now consulting with employers on a 2018 valuation.   This valuation includes USS’s consideration of the JEP report.   They are willing to accept some, but not all, of the JEP recommendations because they consider full acceptance would stretch the risk parameters for the scheme beyond an acceptable level. Their rationale can be read in detail here.

USS have proposed two options to replace the 2017 schedule of contributions. These are described as an Upper Bookend or Lower Bookend approach. In the Upper Bookend option, the total contribution that would need to be paid to maintain existing benefits would be 33.7%.  

This would be cost shared as a 23% employer contribution and a 10.7% employee contribution.

In the Lower Bookend option, USS would set the total contribution that would need to be paid to maintain existing benefits at 29.7% but only if additional contingent contributions were guaranteed to be made available to the USS Trustees if market events caused a further deterioration in the recovery of the deficit that they have assessed within the scheme.

This would vary the rate to a 20.4% employer contribution and a 9.3% employee contribution with the possibility of higher rates if contingent contributions were triggered.

USS have set eleven principles under which they would be prepared to consider contingent contributions and asked UUK to respond to its proposed options for the 2018 valuation.  UUK have been invited to develop and submit a proposal in line with the eleven principles, if UUK wishes to pursue the Lower Bookend contribution option. UUK have engaged the actuarial services of AON to review the USS material and to develop a potential proposal for contingent contributions.

It is important to note that the USS Trustee determines the contributions following consultation with UUK. USS does not require the agreement of UUK or the Joint Employer/UCU Negotiating Committee.  If UUK and USS do not come to an agreement on the revised contributions for the 2018 valuation, then the 2017 valuation outcome and the set of contributions in the table above will stand.

Imperial’s approach to the consultation

While we have been waiting for the consultation material, we have discussed some principles with the College community and the local branch officers from UCU to support our decision making on this issue.  Following feedback on these principles, we are developing a proposed position along the following lines:

  • In our response to the 2017 valuation, we said that we do not believe we have seen evidence that justifies the level of deficit contributions set out by USS.   We stated that USS should continue to include asset outperformance in its assumptions consistent with the 2014 valuation approach.   We have not seen any additional information in the material distributed in the 2018 valuation material to change our view on these points;
  • We fully support the recommendations of the JEP and will continue to pressure all parties involved in the 2018 valuation consultation to consider them seriously;
  • We do not support any renegotiation of benefits and we will work with all parties to find a way to maintain existing benefits without significant cost increases;
  • We recognise that USS associates increased risk with the JEP recommendations, but we consider it important to align contribution rates as close as possible to the JEP report pending further independent analysis by JEP in phase two of their work;
  • We recognise that implementation of the 2017 default contributions would be unsustainable for many staff and employers and we therefore support consideration of contingent contributions to allow time for the second phase of JEP to complete their analysis and make further recommendations;
  • We have confidence in the collaborative working of the JEP and their ability to make recommendations that ensure a sustainable scheme with excellent and affordable pension benefits for members.

 UUK have asked employers to respond by the end of the day on 13 March to the following questions:

  1. Do we have any specific comments on the proposed assumptions for the 2018 valuation, including views on the proposed upper bookend and lower bookend?
  2. Do we support UUK putting forward a proposal for contingent contribution arrangements to the USS Trustee as it requested?   If not, would we prefer to pay at the upper bookend level, or what would our preferred response be?
  3. Do we find the proposal for a contingent contribution arrangement set out in the Aon note acceptable, taking all factors into account?   If not, which aspects would we wish to change?