If you currently pay into USS then your employer pays in a sum equal to 16% of your salary, while you pay 6.35% of your salary. You get tax relief on your contributions, reducing the real cost. You also pay lower National Insurance because you are not paying into the Government’s State Second Pension Scheme. Also, you don’t pay tax on your employer’s financial contribution.
Take a look at the Cost of contributions modeller to see what the net cost of membership is for you.
Benefits vary depending on factors such as age, but include, subject to USS discretion:
1. Immediate protection for your family or dependants
Members currently paying into USS are covered for life insurance from day one of membership at no extra cost.
A tax-free lump sum of three times your annual salary if you die in service at any time, plus an index-linked pension for life for your husband/wife/civil partner/dependent partner.
This pension would be equivalent to half the pension you would have received at age 65 based on your potential service to that age and your pensionable salary on death.
There would also be financial help for eligible children, normally up to age 18, or older if in approved full-time education or training and approved by USS.
Refer to our Death in Service Factsheet for full information on death in service benefits.
2. Illness/injury incapacity cover
If you cannot carry on working because of long-term illness or injury, you get a pension for life and a tax-free lump sum, subject to USS eligibility criteria.
The size of these payments would depend on whether you have to stop work because of partial or total incapacity.
To qualify for this cover, you must have been a USS member for a minimum of two calendar years.
Special conditions apply if you had had a break in your service within the last two years and if it was known that you had a medical condition when you joined USS.
Refer to our Partial or Total Incapacity Retirement Factsheet for full details.
3. Retirement pension
A regular index-linked income for the rest of your life, increasing in line annually with rises in the Retail Prices Index (RPI) measure of inflation, plus a tax-free lump sum.
Public sector pension schemes (NHS, civil service, local councils etc) follow the same RPI inflation adjustment practice.
On your death, after retirement, there would continue to be an index-linked pension for your husband/wife/civil partner/dependent partner until they die. This would be equivalent to half the standard pension when you retired, plus pension increases to the date of your death.
There could also be support payments for eligible children.
We calculate the money you get on retirement using two sets of figures:
- what we call your ‘pensionable service'. Normally, your pensionable service is simply the number of years and days that you have worked as a USS member with USS employers, calculated on a pro-rata basis for part-time members.
- also your ‘pensionable salary’. We work out what is your pensionable salary according to a “best years” earnings formula – smoothing out any adverse ups and downs in your salary over the years.
How it works
We determine your salary for each period of 12 months that you have been a USS member, over a maximum time of 13 years before your retirement, and revalue up each annual salary, except the last 12 months, using the Retail Prices Index measure of inflation.
Your inflation-adjusted pensionable salary is whatever comes out best – either the highest revalued annual salary during the last three years or your highest revalued salary averaged across any three consecutive “best years” over the last 13 years.
The actual amount of pension you get is calculated as an eightieth of your pensionable salary, multiplied by your years of pensionable service. For the lump sum it is 3/80ths.
1/80 x pensionable salary x pensionable service
Here’s an example based on a member with 7 years and 113 days’ membership in the scheme and a pensionable salary of £40,500 on retirement.
Pension = 1/80 x 7 years 113 days x £40,500.00 = £3,700 per annum
Tax-free cash = 3 x £3,700 = £11,100
This is the ‘standard’ package. You are free to vary the amount of tax-free cash and pension within certain limits.
The retirement income you get from USS is, of course, in addition to your state pension or any benefits you may also be entitled to from the state social security system. You normally have to pay income tax on pension income, unless the tax inspector tells us otherwise.
Refer to Factsheet nine for full details.
Early and Late retirement
There is flexibility, under certain circumstances, within the scheme rules for you to retire before the scheme’s normal retirement age of 65. But your pension may be lower.
From 6 April 2010, the minimum retirement age will be 55, except for retirement due to incapacity. However, if you are made redundant and are aged between 50 and 55 you are still entitled to receive a full pension from the scheme, so long as you had been in continuous membership of USS from 5 April 2006.
However you can set out to plan in a tax-efficient way for early retirement by boosting the value of your pension by making what are known as "Additional Voluntary Contributions" (AVCs), either regularly or periodically.
Money invested in an AVC is currently eligible for tax relief at the highest rate of income tax that you pay.
You can also increase your normal regular pension income in exchange for deciding to take a lower tax-free lump sum on retirement, or none at all, or vice versa, depending on your financial circumstances when you stop work.
You may also be able to carry on working after you reach 65 and thus build up a bigger pension. There is no upper limit on the years of service you can achieve.
However, in the case of both early and late retirement the exact details will depend on your individual circumstances at the time, your contract of employment and the policies of your employer.
For example, regarding late retirement, your employer may not continue contributing towards your pension after you have reached 40 years service or after you reach age 65.
Refer to our Retirement Factsheet for full details.
Job mobility
USS caters for the employment patterns of people working in the academic world, including career breaks. Moving from one USS member institution to another is straightforward, as is transferring your pension arrangement to many public sector organisations.
Important:
Remember to nominate your beneficiaries. We need to know who would receive your USS benefits on your death. Keep this information up to date by completing expression of wish (life assurance nomination) and if you are not married, or part of a civil partnership, then you can nominate a financial dependant to receive the equivalent of the spouse’s pension, use Registration of potential dependant form for this purpose.