USS - Changes to member and employer rates from 1 April 2019
Many of you will know that there has been much discussion relating to Universities Superannuation Scheme (USS), the pension scheme that serves the university sector and associated employers. We realise that you have been inundated with much material from USS over the last 12 months and we are now about to embark on another consultation starting in early September.
The aim of this short note is to explain what this means for you, especially since the USS consultation material is written from a scheme rules perspective and includes a lot of detail, some of which you might well find confusing unless you have spent a lot of time digesting the finer details of the scheme rules which themselves are quite complex.
The main headlines
USS as required by law has conducted its scheme valuation for 2017 and provided the following messages for the stakeholders:
- The deficit (which measures the monetary value of pension promises to 31 March 2017 compared to the value of the scheme assets) is £7.5bn.
- The cost of providing pensions has increased.
As the stakeholders’ representatives – namely Universities UK (UUK) and the University and College Union (UCU) – have been unable to reach an agreement on changes to future benefits and contribution increases from 1 April 2019, the USS board has in the interim invoked a clause in the rules that requires both employers and employees to pay more pending any agreement. It is worth noting that the clause referred to was agreed by the stakeholders some years ago to deal with any stalemate in negotiations. Also as required by the cost sharing rules, the 1% match will automatically disappear from 1 April 2019.
In summary, these are the prospective new rates from the dates shown:
|1 April 2019||1 October 2019||1 April 2020|
|Employer contributions||19.5%||22.5%|| 24.9%
As part of the consultation USS will provide a table that members can use to estimate what effect these changes would have on their take home pay.
Please note that because we do not know how future events will transpire, namely the timing of any agreement between the stakeholders and the fact that USS will require some time to implement any changes, it is uncertain how many of the above changes to rates will be invoked. However, it is very likely that as a minimum the 1 April 2019 increases will occur (subject to the formalities of the pending consultation referred to above).
The University of Warwick’s position
Stuart Croft, Warwick's Vice Chancellor, and other University staff involved with pensions are continuing to engage with the stakeholders to help agree a stable benefit structure that is affordable to both staff and employers. It should be noted that the Joint Expert Panel (JEP) set up by UUK and UCU is due to report its findings on the valuation in September but any findings are unlikely to prevent an increase in contribution rates, at least for those set to change in April 2019. The JEP has a programme of work as set out in its terms of reference.
The University appreciates that these contribution rate increases will be unwelcome and has been asking for more flexibility so that members can continue to afford to contribute to pension saving. It should be noted that if the employer rates also continue to increase to the levels shown then this would have a significant impact on key projects that are currently planned, particularly the capital expenditure recently agreed, i.e. the University’s new building programme.
The University will be developing a set of FAQs to supplement the USS material and provide updates to staff in the coming months.