2018 Valuation update: 9 May 2019

USS has put forward three options for finalising the 2018 valuation, following consideration of UUK’s proposed contingent contribution arrangements and its overall feedback on behalf of employers.

The first two options include the same contribution rates that USS consulted UUK on earlier this year (a fixed rate of 33.7% – option 1, or 29.7% with sufficiently strong contingent contribution arrangements* – option 2) but a third option of 30.7% is now being offered, subject to a 2020 valuation.

The benefits currently offered to members would remain the same in all cases.

Any of these options would achieve a significant reduction in the contributions required from 1 April 2020 under the 2017 valuation (35.6%: 11.4% from members and 24.2% from employers; contributions are currently scheduled to increase in October 2019 to 10.4% and 22.5% respectively).

The options

33.7% - fixed rate, reviewed in 2021/22

This is the rate the Trustee would require in the absence of sufficiently strong contingent contribution arrangements*. In the event that the Joint Negotiating Committee (JNC) could not decide on an alternative approach, the default cost-sharing rule would see members paying 10.7% of salary and employers paying 23% from 1 April 2020. The next scheduled valuation would be as at 31 March 2021 (the outcome of which would be expected in 2022).

29.7% - increases in certain conditions, reviewed in 21/22

If sufficiently strong contingent contribution arrangements can be agreed*, members would pay 9.3% of salary under the cost-sharing rule and employers would pay 20.4%. Contingent contributions could be triggered in certain conditions (which, in a 'worst case' scenario, could see the overall rate increase annually by 2%, up to a maximum of 6%). The next scheduled valuation would be as at 31 March 2021 (the outcome of which would be expected in 2022).

30.7% - fixed rate until October 2021, reviewed in 20/21

This rate could be applied as an alternative to contingent contribution but is subject to a valuation in 2020 – a year earlier than scheduled. Under cost-sharing, members would pay 9.6% of salary and employers 21.1% until October 2021. If the contribution rate arising from a 2020 valuation cannot be agreed and implemented before 1 October 2021, the rate would rise thereafter to 34.7%. These rates reflect the contributions that might otherwise have been triggered under sufficiently strong contingent contribution arrangements*.

*USS does not believe that the contingent contributions arrangement proposed by UUK provides adequate protection from short-term risks in its current form but has set out how it could be adjusted to for this option to be progressed.

Next steps

USS has written to UUK, University & College Union (which represents members) and the Chair of the JNC setting out these options in more detail and will need to consider their feedback before the outcome of the 2018 valuation – and the rates members and employers will pay – can be confirmed.

Unless and until the 2018 valuation is finalised, the contribution changes previously announced under the 2017 valuation will be applied.

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Published date: 9 May 2019