If you are currently paying into USS, you are able to improve your benefits by making extra contributions, called AVCs (Additional Voluntary Contributions), or by transferring benefits into USS from other pension arrangements that you may have.
There are limits set by HMRC on the maximum amount you can build up in a pension each year, called the Annual Allowance and on the amount of your benefits at retirement. These limits generally affect those members with high levels of service and generally speaking higher levels of salary. You should read the Limits to tax relief and tax-free benefits factsheet before committing to additional contributions.
Want to save more towards your pension?
If you think you need to save more, then USS can help. Of course, we should remind you that there are many other options for saving.
For example, you could pay into another pension scheme as well as USS (as long as your total contributions don’t exceed 100% of your earnings and the Annual Allowance), or look into a vast range of other non-pension forms of saving and investment.
The big attraction of AVCs is tax relief. You will receive tax relief at either 20% or 40% (on any earnings subject to higher-rate tax) on these extra payments.
If you’re not sure, you should seek financial advice. Please click here to view a list of financial advisers living locally to you.
Full information on the AVC options can be found in the factsheet ‘Increasing your benefits by paying Additional Voluntary Contributions’ and you can also speak with the pensions contact at your institution for more information and help.
If you want to save more with USS there are two different ways you could do this.
- Buy extra benefits (pension and tax-free cash) in USS (called the Revalued Benefits AVC) by regular or lump sum contributions:
- Pay up to an extra 15% of your annual salary into this AVC
- Extra pension and tax-free cash for you at retirement at a fixed cost
- If you are interested contact the pensions contact at your institution to begin your contributions, once you have decided how much extra pension you want to buy.
2. Pay into the Money Purchase AVC (Prudential) by regular or lump sum contributions. This is an investment-based facility but you have the choice of where your money is invested:
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Pay a large proportion of your available earnings into this AVC (subject to the limits described below)
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You choose where money is invested and therefore the level of risk
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Option to take all the fund as tax-free cash at retirement (subject to an overall limit)
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Option to buy a pension (called an annuity) with the fund, from Prudential, another provider or from USS when you retire (see the Prudential conversion tool)
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Flexible so that you can reduce or have breaks in your contributions
If you want more information about the money purchase AVC give Prudential a call on:
Tel: 0800 515 914 (existing members call the customer call centre on 0845 600 0343)
Or complete a Money purchase AVC information enquiry form which will arrive directly at Prudential once completed and submitted.
If you get the opportunity at your institution take up the offer of a face-to-face meeting with a Prudential representative. Speak to your pensions contact to see if this is an option.
Alternatively, visit the Prudential website here where you can view the latest investment fund reports.
Maximum contribution to USS Money Purchase AVCs
There is a limit set by USS to the maximum you can pay in to the USS Money Purchase AVC, as follows:-
Annual Allowance £50,000 (or annual salary of lower)
Less standard USS contributions
Less additional contributions to the USS Added Years AVC
So, if your salary were £85,000 and a you paid 3% to the Added Years AVC facility, then the maximum MPAVCs you can pay will be limited to:-
£50,000 – ((£85,000 X 7.5%) + (£85,000 X 3%)) = £41,075.00 pa or £3,422.00 pm.
If you receive a salary increase during the year then of course you may increase your USS Money Purchase AVCs in proportion.
Maximum Benefits
HM Revenue & Customs (HMRC) introduced a new tax system for pension schemes from April 2011. The new system creates 'allowances' for the maximum pension benefits that members can accrue in a tax preferential way.
There are two different allowances:
- The Lifetime Allowance (LTA)
- The Annual Allowance (AA)
These allowances are relatively high and generally affect members with higher than average salaries and long service in the scheme. But, under this tax system, members can pay into the USS AVC arrangements or an alternative arrangement outside USS. .
However, the maximum annual benefit accrual (growth in the value of your benefits in one year) is subject to a maximum that can attract tax relief, this being the Annual Allowance.
If your annual benefit accrual or final retirement benefits exceed either the AA or LTA then a tax charge is made to the excess value. Full details are available from the limits to tax relief and tax-free benefits factsheet.
For a member of the Career Revalued Benefits section to exceed the Annual Allowance in any particular year you would need to build up a pension of £50,000/19 = £2,631.58 pa, you’d need a full year of service and a salary of £210,526 to get that amount of pension in one year. You do however need to include in the Annual Allowance calculation the amount of any AVCs paid.
How does the Revalued benefits AVC affect the Annual Allowance?
If you buy extra pension by lump sum, the full amount of benefit being purchased will be added to the 'closing value' in the Annual Allowance calculation.
If you decide to buy an additional pension of £1,000pa by monthly contributions you are actually buying that additional pension gradually each year. So, if you were buying the pension over 10 years, each year you would be buying £100, so the AA calculation would increase by:-
19 X £100 = £1,900
How does a Money Purchase AVC affect the Annual Allowance?
This is very easy to work out. The gross amount deducted from your pay (before tax relief) is the value you add in to the Annual Allowance calculation.
So, using the example above, where the Annual Allowance used up was £13,585 (before any AVCs paid), if you had paid £10,000 over the year into Money Purchase AVCs, then the amount of the Annual Allowance used up would now be £23,585.00.
So, it’s much easier to work out how much you can pay in to the Money Purchase AVC and stay within the Annual Allowance limit.
Access your money purchase account online:
Click here to be taken to the Prudential website.
USS members have access to:
- Fund values
- View individual contribution/plan records
- Switch funds
- Redirect contributions
- Change Personal details
When logging on for the first time, you will need your username and password:
Example:
Username: U291AB123456A
Password: AB123456A
You will be prompted to change your password the first time that you access the site.
Transfer benefits in to USS
You could increase the amount of service you have in USS by making a transfer into the scheme from a previous pension arrangement. Please refer to the section on Transferring-in benefits for detailed information on this option.