It’s more than possible that you will spend as many years in retirement as you will have spent working. In which case, you need to save enough while you are earning so that you can afford to live when you are not- especially if you want to make the most of your retirement.
This section primarily looks at retirement from the point of view of a member that is currently paying into USS. If you have left the scheme and are approaching retirement please go to the 'Retirement Process' section of the page.
Prepare for your retirement
Start young!
The younger you start saving for your retirement, the more financially prepared you will be.
Making the best decisions
No matter how soon you start, you still need to choose the best savings vehicle(s) available to you.
The Government has described final salary schemes, like USS, as being an excellent means of providing for retirement and they are regarded as the best type of pension scheme you can get.
However, if you've left it until later in life to join, or there have been times when you haven't been saving at all or you want to retire earlier, you still may need to take action to save more.
How much total income will you have when you retire?
Our wealthcheck calculator is interactive and designed to give you an idea as to what your retirement income will be as a percentage of your current salary. Also, use the benefit modeller to work out how much your USS pension might be and also to investigate the options you have about the amount of pension and tax-free cash you might want to take.
Increasing your retirement benefits
Once you have found out how much you will have to live on in retirement, what can you do if it is not enough? Well, there are plenty of investment and savings options available outside USS and you should consider these carefully and take advice on what’s best for you. There are two methods (via USS) of saving extra contributions, called Additional Voluntary contributions (AVCs).
If you'd like to find out more about paying AVCs, go to the Maximising your Pension page.
Retirement Process
You’ve saved all the hard-earned cash that you can to make your retirement financially easier, so now it’s time to decide how much pension and tax-free lump sum cash you want to take.
I’m not currently paying in to USS as I left the scheme
If you are approaching retirement please contact the Deferred Retirement Team at USS for a quotation. We suggest you do this at least 3 months before your retirement date, we are happy to provide you with a quotation earlier if you wish. If you are some way from retirement take a look at the deferred pension increase modeller to estimate what your benefits might be at retirement.
USS will contact you near to your 65th birthday or the contractual pension age of your last appointment,if that was earlier than age 65 to advise you of the value of your unreduced retirement benefits.
To see what benefits you will be entitled to and also when you might draw them please refer to the Leaving the scheme booklet.
I'm currently paying into USS
The pensions contact at your institution should submit to us a request for a quotation ideally three months before your intended retirement date.
You will receive this quotation along with an option form, which you need to complete and return to USS to indicate your preference. Closer to your retirement date, and once your completed option form has been received, we will issue final retirement figures to your home address and a copy to your institution.
Think carefully about your options between how much lump sum you take and your regular monthly pension income. Take a look at the factsheet twenty four - tax free cash, which explains your choices. Also take a look at the factsheet nine - retirement which explains in more detail the retirement process and benefits.
Please note that once your retirement benefits are in payment it will not be possible to amend your retirement option decision.
Your tax-free lump sum will be paid into your bank account on the first working day after retirement, except in the circumstances surrounding delayed notification of retirements, or it can be paid in by cheque instead.
Payments of retirement pension shall be made commencing on the 21st day of the calendar month following that in which retirement occurred, except in the circumstances surrounding delayed notifications of retirements. In these cases the payment of member's retirement pension will be made in the next available monthly payroll cycle.
HM Revenue & Customs (HMRC) introduced a new tax system for pension schemes from April 2006. 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 currently affect only a small number of high earning members in USS, so most USS members needn't worry about them.
But, under this tax system, members can pay up to an extra 15% of salary into Added Years AVCs and up to a total (including any added years savings and standard USS contributions of 6.35%) of 100% of available salary into another pension savings product, either 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 factsheet sixteen - high earners factsheet.
The current and future values of the LTA and AA are given below:
HMRC issued the figures for the first five years from April 2006. In the Budget of April 2009 the government announced that the values quoted for the 2010/11 tax year will be frozen for five years.
Lifetime Allowance Values |
|
| 2006/07 |
£1.50 million |
| 2007/08 |
£1.60 million |
| 2008/09 |
£1.65 million |
| 2009/10 |
£1.75 million |
| 2010/11 |
£1.80 million |
Annual Allowance Values |
|
| 2006/07 |
£215,000 |
| 2007/08 |
£225,000 |
| 2008/09 |
£235,000 |
| 2009/10 |
£245,000 |
| 2010/11 |
£255,000 |
Prudential AVCs
If you have paid Prudential AVCs, you will have some additional choices to make.
- Take the Prudential fund as tax free cash up to a maximum of either 25% of the LTA or 25% of the USS fund value if less. This may limit the amount of cash you can draw from USS or any other pension benefits you are drawing at the same time.
- Convert 100% of the Prudential fund into additional years and days pensionable service in USS. You can’t convert just part of it to additional years and days.
- Use 100% of the Prudential fund to buy an annuity (with the option to take up to 25% of the funds as cash)
- Delay drawing any of the AVC fund until a later date. If you choose this option you can’t subsequently transfer your Prudential fund into USS, you will also be limited to taking a maximum of 25% of the Prudential fund as a tax-free lump sum.
If you go for the annuity you have the freedom to choose to buy it from the Prudential, USS or from any other pension provider.
In your retirement quotation you will also receive figures assuming your Prudential fund was transferred to USS and purchased additional years and days pensionable service or used as part of your tax-free cash limits.
Quotations in respect of the benefits prudential could provide on retirement should be obtained directly from Prudential. Likewise, open market quotations should be obtained directly from the provider.
Take a look at the Prudential AVC Conversion tool to see what your Prudential fund might be worth if it were converted into additional years and days pensionable service in USS.
Working after retirement
In order to qualify for a pension you must terminate your current pensionable employment. Reaching age 65, or achieving 40 years’ service, does not automatically make you eligible for a pension if you haven’t stopped working.
You would not be deemed to have retired if you intend to commence another job with your current employer, or with any other employer that participates in USS, that is pensionable in USS. If however, after you have retired you are subsequently offered new employment that is pensionable in USS you can accept that job but you cannot rejoin the scheme, unless you are in receipt of a non-enhanced partial incapacity pension; in this situation contact USS for further information.
You should note that your total income, including your pension, will be assessed for income tax.
If you have retired on the grounds of incapacity please note that the rules of USS provide that USS may either:
(i) withdraw or suspend that pension for periods up to normal retirement age if USS determines that you are no longer suffering from incapacity; or
(ii) withdraw an enhanced incapacity pension and grant a non-enhanced incapacity pension if USS determines that you are suffering from partial incapacity and not total incapacity.
If at any time you consider the above applies to you please inform USS in writing.