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Your employer debt responsibilities

Get to grips with how employer debt works and what can affect it

Employer debt

As an employer, you are responsible for your financial commitment to the Scheme, and in particular how and when a specific payment - called “employer debt” - may be triggered. These are also sometimes called ‘section 75 debts’ or ‘buy-out debts’. This is something the government introduced to make sure any employer participating in a multi-employer defined benefit pension scheme (like USS) is responsible for covering the costs of its liabilities that remain in USS after the employer leaves the scheme.

It’s important to understand that an employer debt can be a very large amount and it may have a significant impact on an employer’s finances.

To find out when the debt would be triggered, take a look at change in circumstances.

How it’s calculated

The law states that this debt is based on the amount it would cost for us to pay to an insurance company to take over responsibility for paying your members’ benefits. Our Scheme Actuary will calculate this figure. The scheme would be able to cover some of this cost, and the employer debt is your employer’s share of the shortfall. We have a buy-out funding level, which shows the percentage of this cost which we can cover.

You can find out more about the scheme’s buy-out funding level in our Report and Accounts.

Factors which can affect the debt

The amount of benefits built up

We’ll work out the value of defined benefits members have built up while they’ve been employed by you. This includes members who are currently building benefits, those who’ve stopped contributing and anyone who’s already retired. We’ll ignore USS benefits a member has built up with any other employer.

The cost of buying benefits with an insurance company

This is how much we’d pay to an insurance company to take over responsibility for paying the benefits. Insurance companies take into account many factors when deciding how much this costs. These include things like the amount of pension, how long they expect to pay the pension for, and financial conditions like interest rates, potential investment returns and inflation. So the Scheme Actuary will consider all of these points when working out an employer debt.

The date that the debt is triggered

Because the factors above, which affect the level of the debt, change regularly, the date that the debt is triggered has an influence on the debt.

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