Factors used by USS

For example, if your NPA is 66, and you want to retire at the age of 59:

• Benefits built up between 1 October 2011 and 5 October 2020, which have an NPA of age 65, will be reduced based on you retiring six years early, by applying the Pre-2022 benefits factor 79.8% to those benefits.
• Benefits built up from 6 October 2020 to 31 March 2022, which have an NPA of 66, will be reduced based on you retiring seven years early, by applying the Pre-2022 benefits factor 77.1% to those benefits.
• Benefits built up from 1 April 2022, which have an NPA of 66 (subject to any increase in the State Pension Age), will be reduced based on you retiring seven years early, by applying the Post-2022 benefits factor 75.3% to those benefits.

A member turns 65 on 1 February 2016 and retires on 31 March 2021 having continued to contribute to USS until they retire.

Their continued active membership of USS after age 65 runs across all of the periods detailed above, and the late retirement factor will therefore be a combination of all three columns. We therefore calculate it in three parts:

1. Before 1 April 2016 – 2 complete months (Feb and March 2016), calculated as follows:
   
   0 year factor − 0
   1 year factor − 0.06
   
   0 year 2 month factor = 0 year factor + (1 year factor − 0 year factor) x 2/12 = 0 + (0.06 − 0) x 2/12 = 0.01


2. 1 April 2016 – 30 September 2020 – 4 years 6 months, calculated as follows:
   
   4 year factor – 0.168
   5 year factor – 0.21
   
   4 year 6 month factor = 4 year factor + (5 year factor − 4 year factor) x 6/12 = 0.168 + (0.21 − 0.168) x 6/12 = 0.189


3. From 1 October 2020 – 0 years 6 months (October 2020 to retirement in March 2021), calculated as follows:
   
   0 year factor – 1
   1 year factor – 1.0428
   
   0 year 6 month factor = 0 year factor + (1 year factor − 0 year factor) x 6/12 = 1 + (1.0428 − 1) x 6/12 = 1.0214


4. The final factor is then determined by combining these factors. The first two are added together, and added to 1, and the result is multiplied by the third factor:
   
   (1 + 0.01 + 0.189) x 1.0214 = 1.199 x 1.0214 = 1.2247

Any benefits built up before age 65 will be increased by 22.47%.

A member turns 65 on 1 April 2020, and retires on 31 March 2021 having continued to contribute to USS until they retire.

Their continued membership after 65 runs across the later two periods detailed above, and the late retirement factor will do the same. We therefore calculate it in two parts:

1. 1 April 2016 – 30 September 2020 – 0 years 6 months (April 2020 to September 2020) calculated as follows:
   
   0 year factor – 0
   1 year factor – 0.042
   
   0 year 6 month factor = 0 year factor + (1 year factor − 0 year factor) x 6/12 = 0 + (0.42 − 0) x 6/12 = 0.021


2. From 1 October 2020 – 0 years 6 months (October 2020 to retirement in March 2021), calculated as follows:
   
   0 year factor – 1
   1 year factor – 1.0428
   
   0 year 6 month factor = 0 year factor + (1 year factor − 0 year factor) x 6/12 = 1 + (1.0428 − 1) x 6/12 = 1.0214


3. The final factor is then determined by combining these factors. The first is added to 1, and the result is multiplied by the second factor:
   
   (1 + 0.021) x 1.0214 = 1.021 x 1.0214 = 1.0428

Any benefits built up before age 65 before 1 October 2020 will be increased by 4.28%.

The late retirement uplift that applies from age 66 (to benefits built up before age 66, from 1 October 2020 onwards), applies only where your 66th birthday falls after 5 October 2020, and therefore the factor is always calculated based on the last table alone.

A member turns 66 on 1 December 2020, and retires on 31 March 2021. The factor is calculated as follows:

From 1 October 2020 – 0 years 4 months (December 2020 to retirement in March 2021), calculated as follows:

0 year factor – 1
1 year factor – 1.0428

0 year 4 month factor = 0 year factor + (1 year factor − 0 year factor) x 4/12 = 1 + (1.0428 − 1) x 4/12 = 1.0143

Any benefits built up before age 66 after 1 October 2020 will be increased by 1.43%.

These figures are for full years. If your calculation is done part way through a service year, e.g. four months through a service year, then the calculation based on the below figures, may be different to what you actually get.

For example, if you retire at age 58 years and three months, your commutation factor is worked out as follows.

We first calculate two factors, each linked to a different part of your benefits, depending on when they were built up.

• Pre 1 April 2022 Factor at 58 years 3 months = Factor at 58 + [(Factor at 59 − Factor at 58) x 3/12] = Factor to be used
• 23.832 + [(23.273 − 23.832) x 3/12] = 23.832 + (-0.13975) = 23.6923

• Post 1 April 2022 Factor at 58 years 3 months = Factor at 58 + [(Factor at 59 − Factor at 58) x 3/12] = Factor to be used
• 21.904 + [(21.441 − 21.904) x 3/12] = 21.904 + (-0.11575) = 21.7883

We then combine these factors together based on how much of your benefits were built up before 1 April 2022 and how much were built up after that date.

For example, If you have £10,000 per annum of Retirement Income Builder pension built up in total, with £7,500 built up before 1 April 2022, and £2,500 after 1 April 2022, then in percentage terms 75% (£7,500/£10,000) of your benefits relate to pre 1 April 2022 benefits, and 25% relate to post 1 April 2022 benefits.

The overall commutation factor is therefore calculated by combining the two factors in these proportions, as follows:

Overall factor = (pre 1 April 2022 percentage x pre 1 April 2022 factor) + (post 1 April 2022 percentage x post 1 April 2022 factor)
= 75% x 23.6923 + 25% x 21.7883 = 17.7692 + 5.4471 = 23.2163

This means that for every £100 per annum of Retirement Income Builder pension you exchange, you will receive £2,321.63 (100 x 23.2163) of lump sum in return.

These figures are for full years. If your calculation is done part way through a service year, e.g. four months through a service year, then the calculation, based on the below figures, may be different to what you actually get.

For example, if you retire at age 58 years and 3 months, your reverse commutation factor is worked out as follows:

We first calculate two factors, each linked to a different part of your benefits, depending on when they were built up.

• Pre 1 April 2022 factor at 58 years 3 months = factor at 58 + [(factor at 59 − factor at 58) x 3/12] = factor to be used
• 33.23 + [(32.16 – 33.23) x 3/12] = 33.23 + (-0.2675) =32.9625

• Post 1 April 2022 factor at 58 years 3 months = factor at 58 + [(factor at 59 – factor at 58) x 3/12] = factor to be used
• 30.1 + [(29.22 – 30.1) x 3/12] = 30.1 + (-0.22) =29.88

We then combine these factors together based on how much of your benefits were built up before 1 April 2022 and how much were built up after that date.

For example, if you have £10,000 per annum of Retirement Income Builder pension built up in total, with £7,500 built up before 1 April 2022, and £2,500 after 1 April 2022, then in percentage terms 75% (£7,500/£10,000) of your benefits relates to pre 1 April 2022 benefits, and 25% relates to post 1 April 2022

The overall reverse commutation factor is therefore calculated by combining the two factors in this proportion, as follows:

Overall factor = (pre 1 April 2022 percentage x pre 1 April 2022 factor) + (post 1 April 2022 percentage x post 1 April 2022 factor) = 75% x 32.9625 + 25% x 29.88 = 24.7219 + 7.47 = 32.1919

This means that for every £1,000 of lump sum you exchange, you will receive £31.06 (1,000/32.1919) of gross annual Retirement Income Builder pension in return.

These figures are for full years. If your calculation is done part way through a service year, e.g. four months through a service year, then, based on the below figures, may be different to what you actually get.

For example, if you retire at age 58 years and 3 months, your conversion factor is worked out as follows:

Factor at 58 = 26.21
Factor at 59 = 25.59

• Factor at 58 years 3 months = Factor at 58 - [(Factor at 58 − Factor at 59) x 3/12] = Factor to be used
• 26.21 – [(26.21 - 25.59) x 3/12] = 26.21 – 0.155 = 26.06

This means that for every £1,000 of Prudential MPAVC fund you exchange, you will receive £38.37 (1,000 / 26.06) of gross annual pension in return.

The factors are reviewed monthly and depend on the prevailing market conditions. Sample rates are shown below.