Pensions update: consultation on the 2018 valuation - 31 July 2019
We hope that you are having a good summer. We wanted to update you on the USS pension scheme 2018 valuation discussions.
We last wrote to you with our response to the UUK consultation on options for completing the 2018 valuation. We believe Option 3 provides the best solution available to avoid significant, and for many unaffordable, increases to contributions while allowing time for the Joint Expert Panel (JEP) to complete their work and move quickly towards a new valuation in 2020. Option 3 sets total contributions at 30.7% for the next two years, whereas without agreement the USS default position already agreed with the Pensions Regulator will be 35.6% from April 2020.
Since then, UUK have consulted with employers on protective measures to allow the covenant to be confirmed as “strong” which would be a pre-condition to implementing Option 3. This included a moratorium rule on employer exits and arrangements to monitor debt levels in the scheme’s participating employers. Following discussion at President’s Board, the College submitted a response that supported the package of protective measures subject to further details on implementation.
The organisations involved in the pensions dispute are meeting over the next few weeks to try and progress the valuation. The Joint Negotiating Committee (JNC) met on Monday this week to discuss the protective measures approved by employers. The USS trustee Board meets today to consider Option 3, now that it is confirmed as an option supported by the majority of UUK employers. This will be followed by an important meeting of the JNC on 20 August. We hope that the JNC will support Option 3, otherwise the USS trustee is likely to revert to the 2017 valuation decision already approved by the Pensions Regulator. This default position would see employer contributions increase to 22.5% and employee contributions to 10.4% in October 2019 and employer contributions increase to 24.2% and employee contributions to 11.4% in April 2020.
The Regulator must also separately approve any new agreement reached between the parties. We have written directly to the Pensions Regulator urging them to work with the other parties involved to come to a mutually agreeable valuation as soon as possible and avoid the default 2017 valuation contribution increases. We reiterated our support for the JEP process and urged openness and transparency from all involved.
There is still work to be done and we are some way from an agreement, but this needs to be resolved by 20 August in order to put in place the new arrangements before the default October 2019 increase.
If you would like to know more about the 2018 valuation please visit our webpages where you will also find a modeller that shows the financial impact of the various options on your net pay.
We will update you again when we have news on how the discussions are progressing.
Alice & Ian
Professor Alice P. Gast, President
Professor Ian Walmsley, Provost