Your retirement options with USS

There are a number of different ways to access your pension when you cease employment and retire, allowing you to choose a combination of income and tax-free cash to suit you.

There are two sections of USS that work alongside each other:

The USS Retirement Income Builder

The USS Investment Builder

Pension growing plant Investment growing plant

The amount of pension you get from the USS Retirement Income Builder is based on banking 1/75th of your salary up to the threshold* for each year you’re a member of USS, increasing in line with inflation. But this isn’t all you get – there are a number of tax-free cash options available too.

The ‘standard’ package with USS is your pension as a regular income, plus three times this as a tax-free cash lump sum.

You can take more or less cash, or no cash at all, and receive a higher or lower pension instead. Some may want to take as much tax-free cash as possible to pay off their mortgage or go on a once in a lifetime trip. But others may prefer to take less cash and increase their pension to treat themselves little and often.

The maximum amount of tax-free cash you can currently take is 25%.

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A member with a £10,000 pension would get £30,000 tax-free cash under the ‘standard’ package. If they choose to take the ‘Max Pension’ option and no cash, by converting their £30,000 tax-free cash into pension, they would have around £11,600 each year in pension, with no tax-free cash**.

Or a member may want more tax-free cash and less pension. If they were to take an additional £20,000 tax-free cash, they would need to give up £1,100 of their pension**. This gives a pension of £8,900 plus £50,000 in tax-free cash – within the 25% limit.

If you have savings in the USS Investment Builder, you can take these alongside your USS Retirement Income Builder benefits, or keep them invested if you don’t need them as soon as you retire. Your options are:

  • Take as much tax-free cash as possible
  • Leave all, or your remaining, savings invested, and withdraw up to four cash payments per year as and when needed***
  • Use your remaining savings to supplement your pension by converting them into more pension (only available at the time of taking your USS Retirement Income Builder pension and if the value of your savings in the USS Investment Builder is more than the amount you can take as tax-free cash)
  • Transfer out to another provider to buy an annuity for a guaranteed income for life, or use income drawdown, to keep your savings invested and withdraw payments when you need them.

It’s important to note that any income you receive in retirement will be taxed at your highest marginal rate, so you should bear this in mind when balancing you cash and pension requirements. How and when you choose to draw your benefits can have a significant impact on your overall tax position.

There are also flexibilities around when you take your benefits.

Whilst you can take your benefits at Normal Pension Age (NPA) – currently 65, you could also choose:

Flexible retirement:

With your employer's agreement, you can take between 20% and 80% of your USS Retirement Income Builder savings from age 55, as long as you reduce your hours and salary by at least 20%

Late retirement:

Should you remain in employment after NPA, you can continue to build up your savings and retire at a later date. Both you and your employer will continue to contribute to the scheme

Early retirement:

If you’re age 55 or over and have at least two years of USS service, you may be able to retire before the NPA. If you retire early, your benefits may be reduced to account for the early payment

When approaching retirement, there’s a lot to consider – we have a range of tools to help you and to support your decision making. You can:

  • Use our benefit illustrator to estimate your future retirement benefits
  • Use our benefit conversion tool (using the estimated income from the benefit illustrator) to estimate the effects of taking more or less tax-free cash on your pension
  • View your current savings in My USS for both sections of the scheme.

*The salary threshold for 2018/2019 is £57,216.50.

**Based on current commutation factors used to convert cash to/from your pension – our benefit conversion tool will allow you to calculate this for your own pension.

***Please read the Taking cash from your USS Investment Builder pot (UFPLS) factsheet for the implications of cash withdrawals.

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