2026 valuation

By law, we have to hold a full valuation at least every three years.

It involves comparing how much money the scheme has at a particular date (its assets) with the total estimated amount of money required to pay all the Retirement Income Builder benefits promised to members up to that point in time (its liabilities).

If we do not think the scheme will have enough money, we have to put a plan in place to address that (known as a Recovery Plan).

We also have to establish the overall contribution rate — described as a percentage of pay — that we will need in future to fund new benefits members build up after the valuation date.

Because the benefits in question will be paid out over multiple decades, we make a number of assumptions about what might happen in the future. This involves comprehensive, in-depth analysis of a variety of factors — such as inflation, interest rates, the outlook for future expected investment returns, life expectancy, and the Higher Education sector — which informs judgements made by the USS Board, having taken appropriate professional advice.

We also engage with the Universities and Colleges Employers Association (UCEA) on the ability and willingness of employers to support risk in the way the scheme is funded. (One example of risk is the potential consequences for participating employers of making good any shortfall if, for example, the investment returns being relied upon to pay members’ benefits do not materialise.)

We cannot plan to take more risk than employers themselves are expressly willing to support (but we can choose to take less). This is also known as our risk appetite.

There are lots of legal requirements and duties when it comes to holding a valuation — including the need to take a prudent approach to assessing how much money we will need. We have to work within a robust legal and regulatory framework, overseen by the Pensions Regulator (who has the power to intervene in several ways if it considers that a valuation does not comply with the law).

The 2026 valuation will be the first the scheme conducts under the new statutory funding regime, with revised legislation and new guidance from the Pensions Regulator featuring new considerations and requirements.

The future is unknowable, so we must be able to evidence to the Pensions Regulator that USS can honour its commitments in a wide range of scenarios — that is, whether economic conditions are fair or foul.

This means we have to allow for a range of possible outcomes — such as higher-than-expected inflation changes in financial markets or investment returns falling short of expectations — rather than just our best estimates.

All of these considerations will be reflected in our proposed funding assumptions which we use to place a value on our liabilities (known as the Technical Provisions), which will be subject to a statutory consultation with UCEA — as set out in our anticipated timetable.

UCEA, in turn, gathers views from participating employers.

We will consider UCEA’s feedback before concluding our view of the funding position and required contribution rate.

The Joint Negotiating Committee will then have a chance to consider how any change to the overall contribution rate is split between members and employers and/or if it wants to make any changes to future service benefits.

One of the new requirements of the new regulatory regime is a Statement of Strategy. This a document outlining the scheme's long-term funding and risk management approach. It has two parts: a funding and investment strategy (on which we are required to consult UCEA) and supplementary information detailing how the strategy is implemented and managed, including risks (on which we are required to consult participating employers).

We are also required to consult UCEA on behalf of all employers participating in USS on the Statement of Funding Principles, the Schedule of Contributions and (if the valuation reveals a shortfall of our assets compared to our Technical Provisions) a Recovery Plan.

USS members (and people eligible to be a member) will be consulted by their employers, if any proposed changes are listed changes set out in legislation (including, but not limited to, increasing member contributions and, in respect of the Retirement Income Builder, reducing the rate of future pension build-up or changing the basis for future benefit accrual).

The latest valuation will be based on a snapshot of the scheme on 31 March 2026 — but the process itself will run into 2027, as set out in our anticipated timetable.

The legislative deadline for completing it is 30 June 2027 (15 months from 31 March 2026).

• Universities Superannuation Scheme Limited

We are the corporate trustee of the pension scheme. We run and manage USS in line with the Scheme Rules (which set out what benefits and contributions are payable, and how the scheme is to be administered) as well as all relevant law and regulations.

One of our primary legal duties as trustee is to protect the existing Retirement Income Builder benefits promised to USS members and ensure they can be paid now and in the future.

The trustee has sole responsibility — under the Scheme Rules and legislation — for identifying the funding position and determining the overall contribution rate required (described as a percentage of pay) to fund the benefits currently being promised to members.

The USS Board considers comprehensive analysis and advice from advisors in making judgements on a variety of assumptions on things like inflation, interest rates, the outlook for future expected investment returns, life expectancy, and the Higher Education sector.

We formally consult the Universities and Colleges Employers Association (UCEA), on behalf of all employers participating in USS, as specified in the Scheme Rules, but also engage with the Joint Negotiating Committee (JNC), University and College Union (UCU), employers, and members.

As one of the largest private defined benefit pension schemes in the UK, we are also subject to named contact supervision from, and regular engagement with, the Pensions Regulator (who has the power to intervene in several ways if it considers that a valuation does not comply with the law).

Once we have established the funding position and required overall contribution rate, the JNC will be able to consider how any change to the overall contribution rate should be split between members and employers and/or if it wants to make any changes to future service benefits.

• The Joint Negotiating Committee (JNC)

The Joint Negotiating Committee is made up of an equal number of UCEA and UCU representatives and an independent Chair.

The Chair of the JNC is an appointee of the committee itself. As an independent member, they have a fiduciary duty to the scheme, and to its beneficiaries, and have a casting vote in JNC proceedings.

The JNC can recommend rule changes at any time and its consent is required for any rule change proposed by the trustee. It has a specific responsibility for deciding how any change to the overall contribution rate required by the trustee should be addressed (i.e., through changes to future service benefits and/or how the change to the overall contribution rate is split between members and employers).

USS members (and people eligible to be a member) will be consulted by their employers, if any proposed changes are listed changes set out in legislation (including, but not limited to, increasing member contributions and, in respect of the Retirement Income Builder, reducing the rate of future pension build-up or changing the basis for future benefit accrual).

• Universities and Colleges Employers Association (UCEA)

UCEA represents the scheme’s participating employers on the Joint Negotiating Committee and makes appointments to the USS Board and to the Advisory Committee.

The Scheme Rules nominate UCEA to act as representative of all participating employers for valuation purposes. It is UCEA who the trustee must consult with in relation to scheme funding.

So, in a valuation, UCEA is formally consulted on the methods and assumptions (demographic and economic, including risk appetite — see below) we will use to establish the funding position and contribution rate.

The trustee is also required to consult UCEA on behalf of all employers participating in USS on the Statement of Funding Principles, the Schedule of Contributions, the funding and investment strategy elements of the Statement of Strategy, and (if the valuation reveals a shortfall of our assets compared to our Technical Provisions) a Recovery Plan.

We also engage with UCEA on the ability and willingness of employers to take risk in the way the scheme is funded and stand behind any volatility in the funding position. (One example of risk here is the potential consequences of making good any shortfall if, for example, the investment returns being relied upon to pay members’ benefits do not materialise.)

We cannot plan to take more risk than employers themselves are expressly willing to support (but we can choose to take less). This is referred to as our risk appetite.

• University and College Union (UCU)

UCU represents the scheme’s members on the Joint Negotiating Committee and makes appointments to the USS Board and to the Advisory Committee.

As trustee, we engage with UCU with the aim of ensuring a good understanding of the key issues that determine our decisions.

• The Pensions Regulator

The Pensions Regulator is the UK regulator of workplace pension schemes.

It has the power to intervene in several ways if it considers that a valuation does not comply with the law.