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Universities Superannuation Scheme (USS) update - 18 March 2019

USS members will be aware from previous updates that there has been a series of consultations relating to the USS scheme valuations. This update provides further information on the latest position and how you can find out more.

Background

Failure to reach agreement on the 2017 valuation prompted the commission of a Joint Expert Panel (JEP) initially to report its finding on the 2017 valuation with a later report due to consider long term solutions.

In the absence of USS accommodating the JEP recommendations in full, “back-stop contribution” rates will take effect. In brief the following changes (arising from the 2017 valuation) are therefore due to take effect.

Effective date

Employer contribution rate

Member contribution rate

Total

1 April 2019

19.5%

8.8%

28.3%

1 October 2019

22.5%

10.4%

32.9%

1 April 2020 (includes allowance for 5% deficit contributions)

24.2%

11.4%

35.6%

If USS was willing to accept the JEP recommendations in full, the contribution rates could be lower than those set out above for October 2019 - namely 9.3% member, 20.4% employer*. Unfortunately, USS is unwilling to offer these lower rates unless employers agree to a new framework of contingent contributions. This framework means that employers accept the potential for triggering further contributions if the funding position was to worsen between valuations in line with set parameters.

Scheme valuation developments

UUK, like the University and College Union (UCU), continues to state that they wish to see the JEP recommendations implemented in full. Furthermore UUK does not consider that a contingent contribution arrangement is necessary in the context of the scheme. Following a request from USS they made a formal contingent contributions proposal to their members, to which the University has responded in March.

How is the University responding?

The University has responded to the UUK proposal and made it clear that it is disappointed that USS has not moved on its approach to conducting the valuation and so not accepted the recommendations of the JEP, and:

  1. We do not believe that contingent contributions are necessary but are willing to support them in order that further progress can be made in relation to the JEP report and a long term solution (expected to be dealt with by the JEP in their second report).
  2. We do not agree with the approach of USS to the valuation which is heavily influenced by the Executive and the Pensions Regulator. There is disconnect between the USS Executive and the sector it ultimately serves.
  3. Any contingent contribution framework has to be agreed with the sector and USS should take full account of the JEP recommendations, particularly with regard their valuation methodology.

What happens next?

  • USS is expected to respond to the feedback provided by UUK following the employer consultation on contingent contributions.
  • The JEP itself is continuing to meet to discuss the second phase of its work which looks at alternative approaches to future valuations and at how the governance of USS might be improved.

What can I do?

You can review the University’s full response to UUK on the contingency contributions proposal. You can also review the UUK and UCU positions on this issue.

USS is due to conduct a webinar on 22 March which will cover their approach to the valuation.

If you have any queries in the meantime, please contact hr.pensions@warwick.ac.uk.

*Please note that these figures are slightly higher than the combined rate of 29.2% suggested by the JEP as a suitable rate for concluding the 2017 valuation.

Further information