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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?

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 is an option 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 currently 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 pensionable salary as at 31 March 2016. The additional benefits as at 1 April 2016 are increased in line with the standard USS pension increases from 1 April 2016 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 process.

Important Information regarding AVCs

As you may be aware, the scheme stakeholders recently agreed a package of scheme changes.  The final salary section of USS will close for future service on 1 April 2016, and members will cease to build up further benefit entitlements in that section from 31 March 2016. There will be no new final salary members and no new final salary benefits provided for service after that date. 

Following confirmation of the scheme changes, and importantly the ending of the final salary link with effect from 31 March 2016, the trustee has confirmed that it believes it is no longer appropriate for members to secure additional pensionable service on a basis which assumes a final salary link to a future retirement age. Therefore, the provision for Final Salary section members to make new AVCs will be removed from 1 November 2015.

Monthly AVCs:

Please note it is not possible for any new final salary monthly AVC arrangements to be taken out after 1 November 2015.  If you wish to proceed with the quotation, please arrange for a USS Added Years AVC enquiry form to be completed and submitted to USS no later than 30 November 2015, with a commencement date of no later than 1 November 2015.

Lump Sum AVCs:

Please note it is not possible for any new lump sum AVC payments to be made in respect of final salary members after 31 October 2015.

Please note the above restrictions do not affect current members of the Career Revalued Benefits (CRB) section.

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:

  • Pay a large proportion of your available earnings into this AVC (subject to the limits described below)
  • You choose where the money is invested and therefore the level of risk
  • Flexible so that you can reduce or have breaks in your contributions
  • Options as to how you use your fund on retirement, including tax-free cash (subject to an overall limit) additional pension from Prudential, another pensions provider or from USS
  • The ability to transfer your fund to another pension provider
  • 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 three years of your first contribution. Full details are available from Prudential.

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

Tel: 0800 012 1439 (existing members call the customer call centre on 0845 515 914)

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

To find out how you can keep your maximum yearly pension and have an additional tax free cash lump sum, use the Prudential calculator.

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 3 years will count from when the original account was opened
  • Pension sharing on divorce

Do you need any help or guidance?

You can find further information from a number of different sources. If you go to our financial advice page you will find information about where to go for financial advice and general guidance about your pension. If you have a money purchase arrangement with the Prudential then their website at www.pru.co.uk/uss can provide you with some help.

If you want specific guidance on your options when you retire with the USS Money Purchase AVC please visit the Pension Wise website at www.pensionwise.gov.uk.

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)
    (a) From April 2015, if you have drawn benefits from a defined contribution type pension arrangement but continue in membership of a scheme like USS, there may be tax implications if you then continue to make any money purchase AVC contributions to the USS Money Purchase AVC. Please refer to the limits to tax relief and tax-free benefits factsheet for more information about what’s called the ‘Money Purchase Annual Allowance'.

These allowances are relatively high and generally affect members with higher than average salaries and long service in the scheme. However, paying AVCs could get you closer to these limits. Full details on the limits are available from the limits to tax relief and tax-free benefits factsheet

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.

Transfers out of USS

If you leave USS you are entitled to transfer your benefits elsewhere. From April 2015 you also have the facility to transfer your money purchase AVC fund independently.

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