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Retirement Income Builder investment performance

A review of the Retirement Income Builder performance against the investment balanced scorecard

Assessing the investment performance of the Retirement Income Builder

An investment balanced scorecard was introduced for the Retirement Income Builder, the defined benefit (DB) part of USS, in July 2022. This is the fourth year of assessing USSIM’s performance against the scorecard.

The balanced scorecard tracks quantitative and qualitative performance. It provides a structured approach to bring together performance across different categories.

Our scorecards allow the Investment Committee to assess the investment and advisory performance of our in-house investment manager, USSIM, independently and holistically. It covers six important categories:

  1. Investment return
  2. Investment risk
  3. Active management
  4. Portfolio resilience
  5. Responsible investment
  6. Advice and support

The output from the scorecard is a rating on a scale of Very Good, Good, Average, Poor and Very Poor.

The metrics within it are calculated or overseen by the performance and investment risk teams who are independent from the investment team. They are provided to the Investment Committee, who assess the performance of USSIM against the scorecard each year. 

For the year to 31 December 2025, the Committee concluded on a score of between Average and Good for the Retirement Income Builder. This was on target. It noted USSIM’s high-quality investment support, strengthening of risk management and strong progress on responsible investment activity. The committee felt that USSIM’s performance in the active management in DB was not at the level achieved in other scorecard categories.

Below are the metrics used in the DB investment balanced scorecard:

You can also view a plain text version in the accordion below

Note: Where the scorecard contains qualitative self-assessments from USSIM these are clearly identified in the scorecard submission and considered by the IC alongside other sources in forming their overall assessment.

Below you’ll find an analysis of some of the metrics within the scorecard that contributed to this rating. All the data is point-in-time values for the year to 31 December 2025.

1. Investment return

In this category, we look at the return of our DB assets versus a range of different return targets and how the funding level evolves.

We believe that USSIM’s performance should be assessed against a range of factors. So, we look at various metrics like how our assets have performed in relation to our liabilities (the benefits promised to members). These metrics include our technical provisions and self-sufficiency funding ratios on the 2023 valuation monitoring basis, which both improved during the year.

The Committee agreed that investment returns were broadly positive across multiple measures, though materially influenced by wider market movements. The return of our growth assets has played a crucial role in the growth of the Schemes’ surplus as has our approach to hedging the risk of our liabilities, as explained in our blog Understanding our hedging strategy.

  • The DB fund is the Retirement Income Builder fund
    The Liability Proxy is an investible representation of the Scheme’s liabilities, built from gilt indices. This allows us to track the performance of our liabilities alongside movements in interest rates and inflation.

    • The technical provisions funding ratio is 123%*
      Technical provisions is a measure of the Scheme’s DB liabilities. It’s the value of assets we need to hold to fund our liabilities. It considers our investment strategy and the support provided by the covenant of the employers. The funding ratio compares the value of assets we currently hold with this technical provisions amount. The Scheme’s funding position has improved further over the year.
    • Self-sufficiency funding ratio is 113%*
      Self-sufficiency reflects the value of assets required to pay, with a high probability, all the benefits members have built up so far while demonstrating a high funding ratio (more than 90%). This would be using a low-risk investment strategy without any further contributions. This funding ratio compares the value of assets we hold with this self-sufficiency amount. This funding ratio also improved over the year.

    *Note: Accurate as at 31 December 2025

2. Investment risk

In this category, we look at several investment risk metrics to measure the Scheme’s asset versus liability risk.

Different investment assets will carry different types and levels of risk. Metrics in this category focus on what might happen if our investment portfolio underperforms expectations and how it might perform in relation to movement in our liabilities. Over the period, we enhanced the Trustee's concentration risk limits for private market assets. In addition:

  • Projected downside reliance
    A 1-in-20 downside measure of how much reliance the Scheme may need to place on employers, as a percentage of payroll. A downside is a negative movement of an economy or market. This is observed quarterly and, over the year, remained within appetite.
  • The interest rate hedge ratio is 53%*

  • The inflation hedge ratio is 54%*
    Interest rate and inflation risks are the most significant financial risks to the Scheme's liabilities and funding ratio. The liability hedge ratios quoted above are relative to the self-sufficiency liability as described in category one.
  • The self-sufficiency Value at Risk (VaR) is £13.4bn
    This looks at how much the self-sufficiency deficit – the excess of self-sufficiency liabilities over Scheme assets – could grow (with a 95% confidence level) over the next year if markets move against us. Over the year, this metric remained within appetite.

*Note: Figures are rounded to the nearest whole number

3. Active management

In this category, we assess USSIM’s asset allocation and actively managed mandates by comparing the return of the Retirement Income Builder to a suite of market comparators.

These market comparators are intended to be alternative theoretical investment strategies that are investible. However, they may not always be within the risk appetite set by the Trustee. We also use market indices to assess the performance of USSIM’s actively managed mandates.

The committee felt that USSIM’s performance in this category was not at the level achieved in other scorecard categories.

Active management remained below target for the year across both DB and DC, influenced in particular by outcomes in the Long-Term Real Return equity mandate (LTRR) and across private markets. The committee noted that the returns for the LTRR mandate, together with the Private Equity and Private Infrastructure mandates, all lagged broader buoyant public markets across 2025.

The three scorecard categories below are more qualitative assessments. We have therefore provided some commentary on how USSIM has been measured.

4. Portfolio resilience

In this category, we assess the investment portfolio’s resilience to liquidity and counterparty events.

For liquidity we look at the probability of the Scheme running out of cash or collateral. For counterparty events we consider the probability of a material loss from a counterparty default, i.e. if someone else involved in the investment does not fulfil their obligations.

We therefore assess how cash, collateral and counterparty risks have been managed. The metrics below that we use to assess these risks were all rated green as they were within our agreed thresholds:

  • Probability of running out of cash
  • Probability of running out of collateral
  • Ability to replenish collateral
  • Probability of losing 0.5% of Scheme NAV from any counterparty default

The committee noted positive outcomes relating to portfolio resilience.

5. Responsible investment

In this category, we assess USSIM’s climate risk management and its integration of wider environmental, social and governance (ESG) risks into its investment decision-making.

The scorecard provides a framework for integrating financially material ESG factors into our governance. While these issues have always been important in the assessment of USSIM’s performance, they are now factored in, in a more systematic way under the investment balanced scorecard approach.

The Investment Committee noted:

  • That USSIM had made strong progress on responsible investment, especially the integration of responsible investment considerations across the wider portfolio.
  • The positive recognition from The Pensions Regulator for our TCFD Report 2025 with updated "No Time to Lose" scenarios and delivery of The Policy Challenges of the Energy Transition paper with support from Transition Risk Exeter (Trex).
  • There is still more to do on the integration of physical risk under the climate scenario analysis work.

6. Advice and support

In this category, we assess the quality of the investment advice and support provided by USSIM.

USSIM provides investment advice to the Investment Committee on a range of issues. USSIM also provides support to USS bodies and its stakeholders. The Investment Committee meets regularly to consider investment issues on behalf of the Trustee.

The committee highlighted the high quality of investment support and advice provided during the year, while noting opportunities for more proactive advice in relation to the equities strategy, and performance drivers for complex mandates.

When the above metrics are assessed, they’re also considered against several counterfactuals. These counterfactuals illustrate the impact of different investment decisions and were considered when assessing USSIM’s performance.

  • Further information

    View our Report and Accounts for more information on our investment performance.

    Report and Accounts