USS’s money purchase arrangement with Prudential

In view of the introduction of the USS Investment Builder in October 2016, the trustee felt that it was appropriate to make a number of changes to USS's money purchase AVC arrangement (MPAVC) with Prudential.

Information and resources

Factsheets and guides

Prudential key features

Deposit fund factsheet

With Profits factsheet

With Profits guide

External links

Prudential USS website

Prudential MPAVC log-in

The changes at a glance

Future contributions into the MPAVC

The only pension contributions that will continue to be paid to Prudential are for those eligible members of the With-Profits Fund who completed and returned the election form to their employer by 1 August 2016 and members who pay life assurance premiums. (Your yearly statement from Prudential will show which funds you invest in).

Life Assurance

Contributions for life assurance will continue unless a member decides to cease paying and this can be done in the usual way by contacting Prudential directly. Prudential will contact every life assurance contributor every three years to confirm the costs for maintaining cover.

MPAVC funds already built up

Most unit linked funds have now been automatically switched to the USS Investment Builder. The final switch takes/took place on 25 June 2018. Funds from Prudential's unit linked funds were/will be automatically mapped to an equivalent fund in the USS Investment Builder. Members have/had the option to select a different fund to switch to if they wished.

USS has no plans to transfer existing With-Profits Fund and Deposit Fund holdings into USS Investment Builder unless you make a positive election to do so. However, the trustee will allow members to transfer these funds to the USS Investment Builder on a voluntary basis.

MPAVC benefit options

If you continue to pay into Prudential's With-Profits Fund, the trustee has agreed that nothing will change in terms of the benefits options you will have in respect of MPAVCs paid through to the end of September 2019. This means, for example, that you can still choose to access your MPAVC funds in the form of cash (subject to limits), or convert these funds into regular pension income in the scheme.

  • How can I tell if I have a MPAVC arrangement with Prudential?

    If you have a money purchase AVC arrangement with Prudential you will receive a yearly statement from Prudential, and your last statement for the year ending 31 March 2017 would have been sent to you in May 2017.

    Your yearly statement will show you the value of your MPAVC fund (or funds). In addition, at different times during the year Prudential may have provided other MPAVC literature to you. For updated information on your fund (or funds) currently invested in the MPAVC arrangement, you can register or log in for online MPAVC account management here.

    If you are in any doubt about whether or not you have an MPAVC arrangement, please contact the Prudential customer service team on 0345 6000 343.

    If you have paid one-off contributions in the past, or have stopped paying regular monthly contributions, Prudential will still have a record of your MPAVC arrangement and you will still receive a yearly statement.

    Please note that MPAVC arrangements are entirely different to voluntary contributions paid to USS to buy additional service in the former final salary section (also known as added years AVCs) or additional pension in the former CRB section (revalued benefit AVCs).

  • How can I tell which funds I am invested in?

    Your yearly statement from Prudential will detail which fund (or funds) you are invested in. For updated information on your funds invested in the MPAVC arrangement, you can register for online access here.

    For further information on the range of funds currently available, including individual fund factsheets, please refer to the Prudential website.

  • Why is USS moving away from the MPAVC arrangement with Prudential?

    Prudential provides the MPAVC arrangement on the trustee’s behalf. The trustee regularly reviews this arrangement to ensure it continues to provide a valuable option for members wishing to save some additional money for their retirement.

    In view of the introduction of USS's defined contribution section, the USS Investment Builder, the trustee felt that it was appropriate to close the MPAVC funds to future contributions from 1 October 2016, with the exception of (i) certain members who were paying regular contributions to the With-Profits fund (for a transitional period ending in September 2019) and (ii) members paying voluntary life assurance contributions. This is because the trustee believes that overall the USS Investment Builder, introduced from 1 October 2016, offers members better value for money for the following reasons:

    • The lower charges which the trustee expects to secure for the investment options offered in the USS Investment Builder, due to the scheme’s economies of scale;
    • The existence of an employer subsidy towards the administration and running costs, and the investment management charges, which is available for the investment options offered in the USS Investment Builder;
    • The offer of the match and likelihood that members already paying extra will wish to take advantage of that matching contribution. If you pay at least 1% of salary as an additional contribution you will currently receive a further 1% contribution from your employer; and
    • Value for money in overall terms, looking not just at charges and their transparency, but also at the support services that will be provided to members.

    The trustee has the power under the scheme rules to make such changes (including switching members’ existing Prudential funds into the USS Investment Builder), where it considers it is in the best interests of members, and can make these changes without the consent of individual members.

  • Are there any changes to the way the MPAVC arrangement can be used at retirement?

    The trustee has decided that nothing will change in terms of the benefit options you will have in respect of MPAVCs. This means, for example, that you can still choose to access your MPAVC funds in the form of tax-free cash (provided the MPAVC fund, when added to your lump sum from your regular membership of the scheme, does not exceed the overall permitted lump sum amount under HMRC rules), or to convert these funds into regular pension income in the scheme using scheme-specific conversion rates as now.

  • I have savings in Prudential's Deposit Fund - what will happen to this?

    Any money you have built up in this fund will remain invested with Prudential. The trustee does not have any plans to automatically move these funds into the USS Investment Builder. As an individual you have the option to voluntarily transfer these funds into the USS Investment Builder (or any other scheme/provider of your choice) however this should not be done without taking financial advice and there are a number of points to consider, including:

    • you could be subject to an exit charge if you choose to move your funds within three years of setting up your MPAVC (see question on exit charges below);
    • this fund has underlying features that includes guarantees - further information on this is provided in the question on bonuses below and in the Deposit Fund factsheet which can be viewed here;
    • Your money built up in the Deposit Fund will not decrease.
  • I am invested in Prudential's With-Profits Fund, but I am no longer contributing into it - what will happen to the money that is built up in the fund?

    Any money you have built up in the fund to that date will remain invested with Prudential. The trustee does not have any plans to automatically move these funds to the USS Investment Builder. As an individual you will have the option to voluntarily transfer these funds into the USS Investment Builder (or any other scheme/provider of your choice) however this should not be done without taking financial advice and there are a number of points to consider, including:

    • you could be subject to an exit charge if you choose to move your funds within three years of setting up your MPAVC (see question on exit charges below);
    • this fund has underlying features that includes guarantees - further information on this is provided in the question on bonuses below and in the With-Profits factsheet which can be viewed here;
    • A reduction to your funds - called a market value reduction - could be applied (see question on transferring my With-Profits fund below).
  • Prudential may apply an exit charge in certain situations when a member withdraws his or her funds. Will this affect me?

    This question will be relevant to your circumstances if you have started your MPAVC arrangement within the past three years. Prudential applies an exit charge in the event that a member withdraws his or her funds – whether With-Profits funds, Deposit or unit-linked funds - within three years of making his or her first MPAVC contribution.

    If you are in this position, the trustee will ensure that any automatic transfer of your unit-linked MPAVC funds to the USS Investment Builder will take place gradually to ensure that you are not subject to an exit charge. For example, if you made your first MPAVC contribution on 1 April 2014, the trustee’s transfer of your unit-linked MPAVC funds would take place on, or shortly after, 1 April 2017.

    If you are in this position and wish to undertake a voluntary transfer, you will need to bear in mind that this fee will be applied. The table below summarises the exit charges that apply and further information on this may be obtained on page 10 of the Prudential Key Features document.

     Year of withdrawal % of fund charged
     During year 1  3%
     During year 2  2%
     During year 3  1%
     After year 3  No charge
  • What if I want to continue contributing to Prudential – can I opt to continue paying MPAVC contributions to Prudential?

    Excepting certain With-Profits contributors and members paying life assurance premiums, it will not be possible for you to pay MPAVC contributions to Prudential after that date.

  • Which investment options will be available in the USS Investment Builder – are they similar?

    Details of the fund range are published in the Guide to the USS Investment Builder.

  • How does the USS Investment Builder offer better value?

    The trustee believes that the USS Investment Builder offers better value for the following reasons:

    • The lower charges which the trustee expects to secure for the investment options in the USS Investment Builder, due to the scheme's economies of scale;
    • The existence of an employer subsidy towards the administration and running costs, and the investment management charges, which is available for the investment options in the USS Investment Builder;
    • The offer of the match, and the likelihood that members already paying extra cash will wish to take advantage of the matching contribution. If you pay at least 1% of salary as an additional contribution you will currently receive a further 1% contribution from your employer; and
    • Value for money in overall terms, looking not just at the charges and their transparency but also at the support services that will be provided to members.
  • Will USS contribute or pay for members to obtain financial advice about the transition from the MPAVC to the USS Investment Builder?

    No. However, USS made arrangements with employers to provide workplace member presentations that covered factual information about USS Investment Builder. The presentations referred to the MPAVC transition but were not tailored to a members specific circumstances. For those who were unable to attend presentations in person there are online materials and webinars available in the resources section.

    If you are still unsure what’s best for you, we strongly recommend that you speak to an independent financial adviser (IFA) before making a decision. You can find an IFA through the following website: www.unbiased.co.uk. However, you may be charged a fee for any advice.

  • If I transfer my With-Profits fund to USS Investment Builder voluntarily could there be any reductions applied to my funds?

    Yes there could be a Market Value Reduction (MVR) applied. This is a common feature of With-Profits funds. It is not possible to predict in advance whether or not one would apply to your funds. For more information on the With-Profits fund please read page 6 (What if you decide to move out of our With-Profits fund?) of the following guide published by Prudential.

  • Are regular and final bonus payments affected in any way by ceasing to contribute to With-Profits?

    Bonuses are the way that you get your share of the investment returns from the With-Profits fund. There are two types – a regular bonus (added annually, if awarded) and a final bonus (an additional bonus which may be paid when you withdraw your funds).

    The Prudential policy on annual and final bonus payments does not change just because With-Profits contributions cease. For more information on the With-Profits fund please read pages 2-4 of the following guide published by Prudential.

    The With-Profits fund provides a minimum guaranteed level of return on the amount you will get back from your investment, which may be greater than the rates of bonuses declared by Prudential. The level of the guarantee will depend on the year in which you paid contributions to your With-Profits fund, as shown in the table below.

    Year in which contributions were made   Minimum guaranteed return provided each year
    From 1 April 2003 onwards  0.01%
    Between 1 April 1996 and 31 March 2003  2.5%
    From 1 October 1993 to 31 March 1996  4.75%

    Your MPAVC investment in the With-Profits fund will continue to benefit from the guarantees as long as your MPAVCs remain invested in the fund. This guarantee is subject to the continued solvency of Prudential’s With-Profits fund.