The 2017 valuation has been finalised

The final contribution rates required of members and employers under the 2017 valuation have now been confirmed.

The confirmation comes after the Trustee Board considered Universities UK's (UUK) response to its consultation on the Schedule of Contributions and Recovery Plan - the final formal steps of the valuation process.

UUK's feedback made clear that the key concern was the rate of deficit recovery contributions (DRCs) - set at 6% by the Trustee Board for the purposes of consultation.

In considering UUK's response, the Trustee Board acknowledged the tentative willingness of employers to take on more risk (as identified in UUK's autumn consultation on the Joint Expert Panel's report).

On balance, and within the limited scope of meaningful changes that could be considered at this late stage of the valuation process, the Trustee Board agreed to make a change to the level of investment returns allowed for in the Recovery Plan.

  • Allowing 10% of the difference between the "best estimate" investment return and the prudent technical provisions discount rate corresponds, in turn, to DRCs of 5%, payable over slightly more than 17 years from the valuation date (31 March 2017).

Under the Trustee's application of the cost-sharing rules, these specific contributions will come into effect from 1 April 2020 when members will contribute 11.4% of salary and employers will contribute 24.2%. (This revises down the original schedule, of 11.7% and 24.9% respectively.)

The change to the rate of DRCs does not result in any changes to the cost-sharing increases scheduled for April 2019 (8.8% & 19.5%) or October 2019 (10.4% & 22.5%), as these increases relate solely to the cost of benefits currently accruing (as opposed to benefits already earned).

Final contribution rates - 2017 valuation
April 2019 October 2019 April 2020*
Member 8.8% 10.4% 11.4%
Employer 19.5% 22.5% 24.2%

*Revised down from 11.7% and 24.9%

A new valuation, as at 31 March 2018, is now underway which could result in a different outcome to the 2017 valuation and, in turn, the cost-sharing increases planned for October 2019 and/or April 2020 being mitigated or avoided.

  • For a copy of the final 2017 actuarial valuation report, click here.
  • For a copy of the final Schedule of Contributions under the 2017 valuation, click here.
  • For a copy of the final Statement of Funding Principles under the 2017 valuation, click here.

Why can't USS apply the Joint Expert Panel's (JEP) recommendations to the 2017 valuation, and avoid the cost-sharing increases?

The 2017 valuation is more than six months overdue (the statutory deadline for completion was 30 June 2018), and the Trustee has a legal obligation to complete it and implement cost sharing.

The Trustee could only revisit some of the fundamental issues raised in the JEP's report - such as market risks, investment strategies and contribution levels - by holding a new valuation, as at 31 March 2018, with an accompanying full consultation on the assumptions underpinning the scheme's Technical Provisions. In line with the guidance from the Pensions Regulator, these should be set according to the sponsoring employers' risk tolerance.

Only a new valuation would allow a sufficiently robust, coherent, informed and internally consistent position to be developed, and the latest data and market experience to be properly incorporated.

Published date: 31 January 2019