Dear Colleagues,

We are writing to update you on the USS 2018 pension valuation. Thank you for your thoughtful input to the consultations thus far. We now have less than a week to give an initial response to the USS proposals presented below.

As you will recall, in March we submitted our response to the Universities UK (UUK) consultation on the USS 2018 technical provisions actuarial valuation. This week the USS Trustee (USS) formally responded to the UUK submission to the consultation. The full background documents we have received so far are attached to this email and available on our USS webpages. UUK are now consulting with employers on the USS proposals.

Summary of USS proposals

USS have proposed three options that they could accept to finish the 2018 valuation. The current benefits for members would remain the same for each option and the options avoid the significant increases to employer and employee contributions currently scheduled for October 2019 and April 2020 as a result of the 2017 valuation to varying degrees:

  • Option 1: Contributions of 33.7% (23% employers; 10.7% employees) to apply from April 2020.
  • Option 2: Contributions of 29.7% with contingent contributions (20.4% employers; 9.3% employees).
  • Option 3: Contributions of 30.7% (21.1% employers; 9.6% employees) to apply from October 2019 and a new valuation would be undertaken in 2020. Under this option the contribution rate would rise to 34.7% in October 2021 unless an alternative was agreed under the new valuation.

The contribution rates in Options 1 and 2 are the same as those in the 2018 valuation consultation from earlier this year.

For Option 2, USS has said UUK's proposed contingent contributions would need to be strengthened for this option to be acceptable (greater likelihood of triggering, bigger step-ups once triggered).  Given the consultation that would be required around contingent contributions it is inevitable that the currently scheduled increases for October 2019 and April 2020 would apply.

Option 3 is a new proposal from USS. It is closer to the Joint Expert Panel (JEP) contribution rate and it allows time for the second phase of JEP to look at the valuation methodology, governance, and options for the long-term sustainability of the scheme.  

We have updated our pay modeller and the information available on our pensions webpages so you can assess the potential impact of each option. We are expecting further analysis from Aon, UUK’s actuarial advisers on the options above and will publish this as soon as we receive it.

UUK consultation

UUK are consulting with employers on which of these three options they prefer. We have been asked to indicate a preferred option before the next USS Board meeting on Thursday 16 May so the three major parties involved - UUK, USS and UCU – can continue discussions. This would be followed with a formal response by Thursday 30 May.

Please contribute your views through your Heads of Departments or by emailing prior to Heads of Department lunch on Tuesday next week. Your input will inform our discussions before we indicate our preferred option by Thursday 16 May. There will then be further opportunities to comment on the College’s formal submission before it is approved by Provost’s Board on Tuesday 28 May and published ahead of the Thursday 30 May deadline.

Thank you for your thoughtful and constructive participation in this process so far. You are welcome to get in touch with us directly at any time with your views or to contact the pensions office with any specific technical questions.

Best wishes

Alice and Ian

Professor Alice P. Gast, President

Professor Ian Walmsley, Provost