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Skip Navigation LinksHome > Scheme guide > Final Salary Benefits section > Maximising your pension

Maximising your pension 

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 in to USS from other pension arrangements that you may have.

Want to save more for your pension?

Firstly you can estimate what your current pension would be. You could use the USS benefit modeller to help you. We suggest you estimate your pension as a percentage of your current pay. That way you can directly compare your current earnings to what you might receive once retired to see if it’s going to be enough to live on.

If you don’t think it’s going to be enough then perhaps you should think about saving more towards your retirement. There’s a number of ways you could achieve this outside of a pension scheme, but saving more through a pension scheme like USS is a very tax efficient way of saving.

If you’re looking to save more through USS then there are options called Additional Voluntary Contributions (AVCs) that you might wish to take advantage of.

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 want to save more with USS there are two different ways you could do this.

  1. Buy extra service in USS (called the Added Years AVC) by regular or lump sum contributions:
    • Pay up to an extra 15% of your annual salary into this AVC
    • You know from day one the amount of service you will buy at the end of the contract
    • Extra pension and tax-free cash based on extra service and salary close to retirement
    • You can get a quote for the cost of buying extra years with the Added Years AVC modeller.
    • If you are interested complete an USS added years AVC enquiry form and pass it to the pensions contact at your institution to deal with.
  2. Pay into a Money Purchase AVC by regular or lump sum contributions. This is an investment-based facility but you have the choice of where your money is invested:
  • Pay a large proportion of your available earnings into this AVC (and still receive tax relief, assuming your payments are within the limits explained below)
  • You choose where the money is invested and therefore the level of risk
  • Option to take all the fund as tax-free cash at retirement (subject to an overall limit)

Find out how you can keep your maximum yearly pension and have an additional tax free cash lump sum using the Prudential calculator

  • 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).
  • Flexible so that you can reduce or have breaks in your contributions
  • Please note that for new MPAVC accounts an exit charge applies to your MPAVC fund value should you withdraw those funds due to retirement, within 5 years of your first contribution. Full details are available from Prudential.

If you want more information about the Prudential Money Purchase AVC give a call on: 

Tel: 0800 012 1439 (existing members call the customer call centre on 0845 600 0343)

Alternatively, visit the Prudential website here for more information and contact details.

Money Purchase AVC exit charge

For accounts, where first contributions were received by Prudential after 19 August 2012, if the fund is withdrawn early it will be subject to an early exit charge in certain situations.

The table below shows the current level of exit charges that may apply.

Year of withdrawal %
During Year 1 3
During Year 2 2
During Year 3 1
After 3 years no charge

Charges may vary in the future and may be higher than they are now.

Please note: The exit charge will be applied after any Market Value Reduction has been applied to any disinvestment from the With-Profits Fund.

In what situations will the exit charge apply?

The main situations where an exit charge will apply are:

  • Having left USS a member transfers benefits to an alternative pension arrangement, including an alternative AVC
  • Retirements at any date with the exception of where benefits are being taken on the grounds of ill health
  • Where you take a short service refund from your scheme and AVC; and the value of your AVC fund (after charges) is greater than the value of the contributions paid

When will an exit charge not apply?

An exit charge will not apply if any moneys are withdrawn due to:

  • Death
  • Switches between investment funds
  • Retirement on the grounds of ill health
  • Claims on the grounds of serious ill health
  • If a member takes a flexible retirement, draws their MPAVC fund at that point and then opens a new MPAVC, this new MPAVC will not be treated as a new account, so long as the new MPAVC is opened within 31 days of the flexible retirement event. Therefore, the 5 years will count from when the original account was opened
  • Pension sharing on divorce

Access your Prudential 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

Maximum contribution to USS Money Purchase AVCs

USS does set a limit on how much you can pay in total each year as gross contributions (before tax relief) in to the Money Purchase AVC. The limit is the Annual Allowance for the year, which is currently £40,000, or your annual salary if lower.

So, if your salary were £85,000 pa you would be able to pay up to £40,000 pa as gross contributions to the USS Money Purchase AVC during the year. If your salary were £30,000 pa, then you could pay up to £30,000 pa to the Money Purchase AVC (of course you would have to ensure all other statutory/employer deductions are paid) during the year.

Charges

Please refer to the ‘Key Features’ document, available on request from Prudential or online at www.pru.co.uk/uss.

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:

  1. The Lifetime Allowance (LTA) 
  2. 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 Added Years AVCs and the USS Money Purchase AVC (administered by Prudential) 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.

Impact on USS AVC options – if you’re increasing your benefits then you will be using up some of either your Annual or Lifetime Allowance.

For Money Purchase AVCs the calculation is easy, simply add the gross contribution into the Annual Allowance calculation, or the total fund value in to the Lifetime Allowance calculation.

For Added Years, if you are paying regular monthly contributions, you are purchasing additional service gradually over time. For example, if you were buying an extra year of service over a 10 year period then for each year you would be securing 1/10th of the total service, this additional service is added to the value of your benefits for AA purposes at the end of each year.

If you choose to buy extra service by lump sum, the full amount of service being purchased will be added to the ‘closing value’ in the Annual Allowance calculation.

You are contracting to buy service gradually over time (unless you are paying by lump sum), but for the purpose of the Annual Allowance you must add in the full value of the service that will be purchased by the end of the contract into the ‘closing value’ of the Annual Allowance calculation. You should consider this very carefully if you are thinking about added years.

If you’re not sure what’s best, you should seek financial advice. Please click here to view a list of financial advisers living locally to you. See the factsheet ‘Limits to tax relief and tax-free benefits' for full information.

Full information on the AVC options can be found in the AVCs factsheet and you can also speak with the pensions contact at your institution for more information and help.

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.

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