Frequently asked questions
Can I join another pension scheme, like the NHS, TPS or SAUL?
If you are currently a USS member, then you cannot change to a different pension scheme because of the exclusivity rules set by the USS.
Is the USS like the Teachers’ Pension Scheme and NHS pension scheme?
Academics at some universities (particularly post-1992 universities) are in the Teachers’ Pension Scheme (TPS) rather than the USS. If you are medical staff working in the NHS you may be in the NHS pensions scheme rather than the USS. These two schemes are very different from the USS.
TPS and NHS are public sector unfunded schemes backed by the UK taxpayer. In contrast, the USS is a private sector scheme directly backed by higher education institutions with a fund set aside (from employer and member contributions, plus investment return) to pay pensions. This means that USS employers carry the risk if the fund is insufficient to deliver the agreed pensions, whereas TPS and NHS pensions are ultimately underwritten by HM Treasury. Unlike the USS, TPS and NHS are not reliant on investment performance, and are not subject to the same regulations that the USS must follow. Although these schemes do still offer a defined benefit pension, the cost to employees in the scheme is higher than those paying into the current USS scheme.
Is USS a Defined Benefit or a Defined Contribution scheme currently?
The USS is a hybrid scheme, meaning that it is partly a Defined Benefit scheme and partly a Defined Contribution scheme. Members currently earn a Defined Benefit pension on salary up to £59,585.72 and Defined Contribution benefits on salaries above this threshold. The USS is one of the largest private pension schemes in the UK that currently still allows new Defined Benefits to be built up.
What is the difference between a Defined Benefit and a Defined Contribution pension scheme?
In a Defined Benefit scheme, the employer agrees to provide a specified, fixed, annual pension payment and/or lump sum at retirement, which is calculated through a formula based on a member’s salary and length of service. The amount usually increases with inflation and is guaranteed until death.
In a Defined Contribution scheme, members have individual saving pots that both they and their employer pay into. At retirement, members draw their pension savings from this fund, which consists of all the employer and employee contributions paid in over the years, plus investment returns that have been earned by investing the scheme in, for example, stocks and shares.
In this kind of scheme, employees can choose whether they wish to take out all their retirement savings as a lump sum, or to opt for alternative options such as an annuity or drawdown. An annuity is a fixed sum of money paid to someone each year, typically for the rest of his or her life. The annuity option provides a guaranteed regular retirement income from your individual saving pot. Drawdown involves keeping your individual saving pot invested but regularly drawing an income from it rather than purchasing an annuity.
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