In July, we let you know that contributions were set to rise to 11% in October. However, we can now confirm that the amount you’ll pay towards building your pension benefits will go up from 9.6% to 9.8% of your salary. The amount your employer puts into the scheme will also go up from 21.1% to 21.4%.
This increase will happen automatically, so you don’t need to do anything other than consider how this may affect your personal finances.
Why is the contribution amount now less than 11%?
The new contribution rate of 9.8% replaces the 11% rate that was scheduled under the 2018 valuation.
The new rate follows a decision by the Joint Negotiating Committee (JNC) to propose benefit changes in response to the funding challenges identified by the 2020 valuation.
The trustee board has agreed to introduce the new rate from October 2021 rather than wait until April 2022, when other changes proposed by the JNC would be implemented if they go ahead.
Will a 0.2% increase in contributions really make a difference?
The contribution increase will support the defined benefits (DB) you build up in the future in the Retirement Income Builder. All benefits that you’ve already built up are secure and protected by law.
Valuable DB benefits are becoming increasingly rare in pension schemes – according to the Pension Protection Fund, 89% of private DB schemes in the UK have closed to new members since 2006, with 48% no longer offering DB pensions altogether.
USS is among the 11% of DB schemes still open to new members – our members account for almost a fifth of the 1,089,000 people in the UK who are still actively paying into private DB schemes. Find out more about your USS benefits.
Where can I find more information?
While contribution rates are set to increase, your USS pension continues to give you the security of a guaranteed income when you retire, no matter what happens to the economy in the future. It also gives you tax-free cash, life cover and benefits for your loved ones.
Issued: 9 September 2021