If you change jobs and move out of higher education you automatically cease to be a member of USS and can’t continue to pay into the scheme. You have various choices as to what to do next.
If you have 2 or more years' (calendar length) membership in USS we work out your accumulated pension benefit using the following formula:
Pension = 1/80th x pensionable service x pensionable salary at leaving Tax-free cash = 3 x pension (as calculated above)
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 leaving:
Pension = 1/80th x 7y 113d x £40,500.00 = £3,700 per annum
Tax-free cash = 3 x £3,700 = £11,100
In USS these benefits are known as ‘deferred benefits’ and the value of these benefits increases over time by the increase in the Retail Price Index.
For example, the increases over the past three years have been:-
- April 2007 3.6%
- April 2008 3.9%
- April 2009 5.0%.
To work out the current value of you deferred pension please use the Deferred pension increase modeller.
You can draw these benefits from your contractual pension age. You can take your pension earlier, but some or all of that pension may be reduced to account for the early payment.
If you have less than 2 years’ (calendar length) membership you have 2 options:
- Receive a refund of your contributions, less tax and a deduction to reinstate you in the State Second Pension scheme, or
- Receive deferred benefits based on your contributions only.
Here’s an example of a refund:
If you had paid gross contributions amounting to £1,015 over a period of 1 year 261 days, you would receive a refund of £595.40 calculated as follows:
|
|
|
|
£1,015.00 |
Contributions |
| minus |
£292.00 |
Payment to S2P |
|
£723.00 |
Taxable amount |
| minus |
£144.60 |
20% tax |
|
£578.40 |
|
| plus |
£17.00 |
Interest |
|
£595.40 |
Net Refund |
|
|
|
Please note:
If you have been part of a salary sacrifice arrangement, offered to you by your employer, for the period of any sacrifice, you will not be entitled to a refund of your contributions as these will have been paid for you by your employer as part of the salary sacrifice arrangement.
Transfer benefits to another pension scheme
However long you have been a member you can transfer the value of your benefits to another pension scheme in the UK and in many cases overseas. The calculation, whether or not you have more than 2 years’ membership, is based on the full value of your benefits, based on the traditional 1/80th formula.
Please go to the transfer out section for more details.
Rejoining
Always remember, if you leave and then rejoin USS in the future then you can cancel any previous benefit and have the original years and days service added to your current membership in USS.
You don’t have to make this decision until you either retire or you leave USS again and in most cases this is beneficial, assuming your salary by the end of your latest period of USS membership is worth more than the salary (plus price inflation increases) from your earlier period of membership.
Opting-out of USS
Membership of USS is not compulsory and you may decide to opt-out once you have joined. If you do opt-out the benefits you get are the same as for any other leaver.
But, if you opt-out within 3 months of joining your employer will arrange for your contributions to be reversed and your tax and national insurance to be adjusted, as if you had never joined USS.
You should consider very carefully before deciding not to join, or withdrawing, once you have joined because the scheme provides an excellent range of benefits.
If cost is a concern, take a look at the Cost of contributions modeller to see what the true cost of membership is. It’s a lot less than you might think.
Also, speak to the pensions contact where you work to discuss your options. You will need to sign a form if you do decide to opt-out.