The 2017 valuation story so far

Low interest rates, the high price of assets, longer life expectancies and the general outlook of lower investment returns in the future are challenging pension schemes across the UK, including USS. Here’s an overview of what’s happened since our 2017 valuation process started.

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The valuation

Every 3 years, we must legally carry out a valuation to establish whether we have enough money to fund the benefits that members have already built up, and determine how much employers and members need to pay so we can provide the same benefits in the future.

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What did it show?

The valuation showed a funding deficit of £7.5 billion (at 31 March 2017) and the cost of building up defined benefits has risen by roughly a third.

The big challenge is the investment outlook. Interest rates have fallen relative to inflation and the price of assets has soared. This means we expect to get less in investment returns than we had originally estimated.

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So what happened next?

In January 2018, the Joint Negotiating Committee (JNC), made up of UUK and UCU representatives and an independent Chair, proposed changes to the future benefit structure to address the increase in cost of securing benefits.

It withdrew those proposals in April 2018 and no alternatives were tabled.

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The JEP

Instead, UCU and UUK set up a Joint Expert Panel (JEP) to review the 2017 valuation.

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The regulator

By law, we must complete the 2017 valuation and show the Pensions Regulator that we have a plan to address the scheme’s funding position. We missed the statutory deadline on 30 June 2018 because of the extensions we provided to support UCU and UUK’s discussions in the JNC.

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What did this mean?

For these reasons, and in the absence of a decision by the JNC, the default cost sharing rule was invoked. This was introduced in 2011 at the request of our stakeholders via the JNC in case there was ever a time when they couldn’t agree how to respond to an increase in cost.

This means contributions from both members and employers will increase from 1 April 2019, to cover the increased cost of securing benefits.

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What are the next steps?

An employer consultation with affected employees and their representatives will take place from September 2018, so you can share your thoughts.

For information on the proposed increase in contributions under the cost sharing rule, read our articles.

The cost sharing process will run in parallel to – but entirely separately from – the JEP process. We're engaging constructively with the JEP, which is expected to report its findings in September 2018.

We’ll continue to provide regular updates to members on both the valuation and the JEP.

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For a glossary of our terms please see more information on our important terms page.