Update on COVID-19 and the valuation

With most of the USS team working from home, we’ve replaced the 9 April webinar with two short videos. In them, we provide information and answer the questions you submitted on how the current situation affects the scheme and your benefits, and give you an update on the 2020 valuation.

Video 1: COVID-19 and your USS pension

The virus and its economic consequences are a challenge, but USS is still working, paying pensions, collecting contributions and keeping your Retirement Income Builder benefits secure.

Pension promises are secure

While the economic situation caused by the effects that COVID-19 have had on global stock markets has had an impact on USS, the pension benefits you have built up in the Retirement Income Builder are protected by law. They are also backed by the collective strength of our 340 sponsoring employers. These benefits are based on your salary each year and the years you’ve worked – they don’t depend on what happens on the stock market. We continue to pay pensions and collect contributions from members and employers.

What the investment team is doing in response

You can take your Retirement Income Builder benefits, whatever the economic conditions. At the moment, we’re making sure we have the cash and liquidity to get through this difficult period.

We’re also taking advantage of opportunities where they present themselves. For example, in recent days and weeks we’ve been optimising our fixed income assets within the Income Builder, trading out of those that have performed best in order to buy other bonds that we think will perform better over the medium term.

In the Investment Builder, we continue to keep all the funds, including the Default Lifestyle Option, under review. While this Lifestyle Option is designed for the long term, we will adjust how it’s invested if we think that’s necessary.

Read more about our investments

How the economic situation affects your Investment Builder savings

If you have Investment Builder savings, you have a pot of money that is invested for your future. While the market downturn will have an impact on Investment Builder savings right now, we expect market conditions to recover in the long term.

If you’re thinking of using your Investment Builder savings soon, see our information about retirement. You can check the value of your Investment Builder savings in My USS.

See more about the Investment Builder in the context of the current market downturn.

How retired members who still have investments are affected

Some retired members still have savings in the Investment Builder. If you are in this situation and you want to know the latest value of your investments or make any changes, please contact us using the contact form.

What happens if you’ve recently received a retirement quote?

You can usually change your mind about the retirement options you’ve chosen, as long as you give us enough notice. Find out more.

What’s happening with transferring in or out?

For now, arrangements for transferring out of USS are unchanged. If you are considering transferring out your USS benefits to another arrangement, please visit the Pensions Advisory Service for free and impartial guidance.

We are continuing to process existing requests for transfers in. However, in the current situation we’re not able to process new requests to transfer in, but continue to keep this process under review.

How to contact us

In the current situation, we’ve had to make some changes to our working arrangements, but we want to make it as easy as possible for you to contact us. We’re regularly updating our contact details with the best way for you to get in touch. For information, go to our contact page.

Tell us who depends on you

USS provides valuable benefits to your family or other dependants, if you die. Please make sure you tell us who those people are, and update us at least every three years. At the moment, due to social distancing advice, you don’t need someone to witness your signature on your registration, but we may contact you in the future to arrange for this. Keep your Expression of Wish and Registration of Potential Dependants details up-to-date using the forms.

Video 2: The 2020 valuation

In common with our peers, we are dealing with very challenging short-term conditions – but any decisions we take now should be consistent with our long-term strategy to secure members’ benefits and protect the sustainability of the scheme.

Board decides to continue the valuation

Our Trustee Board met on 26 March 2020 to consider the scheme’s funding position, the status of the March 2020 valuation, and the actions we could take to respond to what are extremely difficult short-term conditions.

It decided that the most balanced approach to these competing pressures was not to take immediate, short-term action but to go ahead with the valuation, as planned, at 31 March.

This will allow us to re-assess the support available from our sponsors, the outlook for future investment returns and the contribution increases scheduled from October 2021. We will also have up to 15 months to reflect on subsequent developments in financial markets and the HE sector.

We recognise the challenges presented by COVID-19 and will keep the valuation timetable and process under regular review, being flexible where we can.

You can read the update we issued to heads of participating employers .

Taking a long-term view

The ups and downs of the stock market affect the value of the investments that we hold – though not the Retirement Income Builder benefits you receive. Our investment team is taking measured action to address the current position.

But ultimately, we are a long-term investor, so any decisions we take through this period will be consistent with our long-term strategy. We will always be led by our primary duty, which is to make sure the benefits that have been promised to members will be paid when due. We also have a duty to protect the sustainability of the scheme.

How the current market conditions affect the valuation

The valuation is a snapshot of our funding position on a certain date. As some of our investments have gone down in value due to the global economic impact of the COVID-19 pandemic, the total value of the assets we hold has gone down, compared to where they were at the end of February 2020. These market conditions have also increased the value of our liabilities – the money we need to pay the pensions promised. The last valuation estimated a gap between the two of around £3.6bn (at 31 March 2018). This gap is currently estimated to be £11bn.

The valuation will be based on a ‘snapshot’ of the scheme’s funding position taken as at 31 March 2020, but it will take into account the long-term outlook for the global economy, future investment returns and the prospects for our sponsoring employers in the Higher Education sector. We’ll then look at what this means for contributions and for the support the scheme needs from employers.

This financial picture is likely to be less favourable than it would have been before the COVID-19 pandemic. But funding positions constantly change – it was different last year, and it will be different next year. We’ll have up to 15 months from the valuation date (31 March 2020) to reflect on and take account of subsequent developments (known as “post-valuation experience”).

We’ll continue to work with all our stakeholders on these issues and will keep the timetable and process for the valuation under regular review.

We’re constantly engaging with employers about what this might mean for them, including through the recently-published discussion document, which you can find on the 2020 Valuation page.

Further Information