Changes to USS that will affect you

Following the employer consultation on the rising costs of building pension benefits and the cost sharing provisions, we need to let you know about some changes to USS that will affect you from 1 April 2019.

These changes relate to the 2017 valuation, and a summary of consultation responses that employers received from active members of USS, employees eligible to join the scheme and from employee representatives has now been published by the trustee.

The trustee is also carrying out a new valuation – as at 31 March 2018 – and will be consulting with UUK (on behalf of employers) on that in the coming weeks.

What are the changes from 1 April 2019?

Employers will stop paying towards the match

If you have the match, your employer’s last match contribution will be on your March 2019 payday.

After that, unless you cancel it, you’ll keep saving 1% of your salary in your USS Investment Builder pot every month, but your employer will no longer match it.

If you want to keep saving 1% in the USS Investment Builder, you don’t need to take any action, but if you want to cancel the match, visit My USS and follow the instructions on the Manage My Additional Contributions page.

You don’t need the match to make additional contributions. You can build a USS Investment Builder pot by signing into My USS and choosing to make regular monthly or one-off contributions.

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Please note: If your employer offers salary sacrifice* and you have the match, check with your employer’s pensions team whether cancelling the match and replacing it with additional contributions now or in the future could affect your salary sacrifice position. Salary sacrifice is only valid if your employer offers such an arrangement with USS.

*A salary sacrifice happens when an employee gives up the right to receive part of his/her pay, usually in return for the employer providing some form of non-cash benefit. The advantage to the employee is that they will pay lower national insurance contributions; the employer also saves on its national insurance contribution.

A rise in your contributions

The amount you pay towards the cost of your USS pension benefits will increase**.

This increase will happen in three phases, from 1 April 2019 to 1 April 2020. Employers will pay more too, with their contributions also rising at the same time.

We need to fulfil our legal obligations, before we can confirm the contribution rates. This means consulting with employers and completing the 2017 valuation.

We expect the contribution rates and phases to be the broadly the same as those you were consulted on, but we’ll update you as soon as the final rates are set.

Proposed contribution rates and phasing

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**Members with Enhanced opt-out will not be affected by contribution rises.

**Contributions from members with a Voluntary Salary Cap will rise on salary up to the level of the cap. Any optional contributions to keep life cover and ill-health benefits will be extra.

For information on Enhanced opt-out and the Voluntary Salary Cap, visit the resources section.

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Why does USS have to change?

At least every three years, by law, we have to do a valuation. This is a snapshot of the scheme’s assets, the amount we need to pay for pensions already built up by members, investment performance and assumptions about the future – like how the global economy might go, the cost of investing and expected investment returns.

It shows us how much members and employers need to pay so we can keep giving you the benefits that you’re building up now, or how benefits might have to change to keep the cost to you the same as it is now.

We give this information to the Joint Negotiating Committee (JNC), which is made up of member representatives from the University and College Union (UCU) and employer representatives from Universities UK (UUK). If we decide that contribution levels need to change, the JNC decides how the changes should be shared between members and employers, or it can decide to change benefits.

The JNC couldn’t agree on changes, so we couldn’t complete the valuation by the legal deadline or respond to its conclusions, so we’ve had to apply the cost sharing provisions (rule 76.4-8).

The cost sharing provisions were written into the rules after the JNC asked us to introduce measures to safeguard members’ benefits should it ever fail to agree a way forward.

We must make sure USS is sustainable, and have agreed to phase in the contribution increases. We hope that, with a will on all sides, this will mean the JNC can agree on a longer term way forward before the later phases of contribution rises take effect.

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What do you get out of USS?

Being a USS member means you build up guaranteed benefits for the future in the USS Retirement Income Builder and you have a range of flexible options with the USS Investment Builder:

Saving for the future

Your employer makes significant contributions

You can choose what additional contributions you want to make to boost your USS Investment Builder pot

You build income, tax-free lump sums and savings for the future

You can choose to take your cash in a way that suits your lifestyle

Value for money

You get tax relief on the contributions you make

Your employer covers most investment and administration costs

You benefit from USS’s economies of scale

Peace-of-mind

You normally have three times your salary in life cover

Your loved ones could be eligible for benefits, should the worst happen

You can take control of how you save for the future, with My USS

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What should you do next?

Your contributions will rise, so you should think about budgeting for this. You may want to use the budget planner on the government’s Money Advice Service website to plan your outgoings.

If you have the match, decide whether you want to keep it from 1 April 2019. If you don’t have it, decide whether you want to take advantage of your employer’s match contributions before they stop in March 2019. Go to My USS to manage the match.

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