What did the USS Investment Builder performance in year one add up to?

Dart board banner

Over the last twelve months, USS members have been introduced to the USS Investment Builder, one of the important new additions to our scheme. For many members, it is already an integral part of their retirement plans, with two in five members now having USS Investment Builder savings and one in six members taking the match. So, one year in, how have things worked out for these members?

Let’s begin with a quick reminder of the basics. The USS Investment Builder is available to all active members, with all those earning above the salary threshold (£55,550 currently) or transferring from other schemes, joining automatically. Those choosing to make additional contributions currently receive the match on the first 1% of contributions (if they choose to take the match in My USS) and tax relief on these savings, which can really add up - as we’ll illustrate later in this article.

Members can choose how their USS Investment Builder savings are invested, with two lifestyle options and up to 10 investment funds available. You also have choices when the time comes, as to how and when you receive your USS Investment Builder savings. There is a lot of information about the USS Investment Builder on our website – a good starting point is the animated guide to the Investment Builder.

How much have members saved?

As a USS member, you are in good company alongside colleagues in higher education (HE) throughout the UK. As such, you may be interested in what decisions other members have made surrounding their pension choices. During the first 12 months of the USS Investment Builder, almost 70,000 members are benefiting from employer contributions into the USS Investment Builder, over 40,000 of those have taken the match and are receiving the matching contribution from their employer.

USS Investment Builder contributions vary from less than £100 to more than £1,000 a month – with just over half the contributions ranging from £300 to £599 a month

We can also see from the chart below, that over 30,000 (20%) USS members have chosen to take the match in the first year of the USS Investment Builder. For the members who have taken the match, the average 1% employer contribution in September was £42.04 per member. There is also an additional 12,281 members who are making further additional contributions of 2% or more.

The number of members paying voluntary additional contributions into the USS Investment Builder

chart

*41,531 Replica Vs 41,513 Capita DC Monthly Admin Report September 2017

Want to learn more about taking the match? Watch our animated guide more information.

As an active USS member, you can keep track of any additional contributions in your USS Investment Builder using a My USS account. You can also check the fund factsheets to see how the different lifestyle choices and investment funds are performing. This is a really good way of learning more about your retirement savings and investments.

Find out more about the USS Investment Builder by reading our guide to investing in the USS Investment Builder.

How much tax have members saved?

Unlike putting your money into a savings account, the contributions made into the USS Investment Builder are taken out of your salary before tax, making it a more cost-efficient way to save. Whilst everyone’s tax affairs are different, for the average USS member the tax-efficiency of additional contributions represents a big benefit that soon adds up.

A member earning £30,000 a year taking the match, would personally contribute £300 and receive £60 in tax relief. A member earning £60,000 a year taking the match, would personally contribute £978 and receive £391 in tax relief.

How have the USS Investment Builder funds performed?

With a bank or building society savings account, your balance is readily available online. The same is true of your USS Investment Builder savings. You can simply log into My USS and see the value of your savings, as well as the change in value based on the performance of your investments.

The great news for USS members is that since they launched, all funds have outperformed their benchmarks, meaning they have done better than the market. This outperformance helps USS members grow their pots more quickly, helping them achieve their retirement goals.

chart

However, it is important to look at investment return over the medium to long-term when retirement planning, not just single year results. So, we recommend you continue to keep track of how things are going using our fund factsheets. You can also compare performance against benchmarks (see article, How do we know if our pensions are performing well? to find out more) to make a fully informed assessment.

Find out more about how we measure pension performance in our blog, How do we know if our pensions are performing well?

How else do USS members benefit?

As our article how do we know if our pensions are performing well? explains, investment management is a complex task that depends on specialist knowledge and expertise.

Most people with savings in private pension schemes have to pay investment administration and management charges – with typical annual fees of 55bps of their total funds under management. That’s not the case for USS Investment Builder members. Our in-house investment team negotiates hard with external fund managers to provide a cost-effective service, and unlike many other private pension schemes, at USS your employers subsidise the investment management charges on your behalf. This directly benefits members and the savings soon add up.

What does all this add up to?

By coming together with colleagues and peers in the HE sector, you benefit from economies of scale and collective buying power. In the first twelve months of operation, the total value of the contributions and investment returns in the USS Investment Builder adds up to c.£386 million in assets.

The individual benefit for members really adds-up too – with those taking the match receiving additional employer contributions, tax relief and investment performance growth, while also saving investment management charges. The chart below shows how all this adds-up for members on different salaries – assuming that each took the match and invested in the default lifestyle option for the 12 months ended September 2017.

As the chart shows, the total value to a member earning £30,000 a year and taking the match was £702 for their contribution of £300. The total value to a member earning £60,000 a year and taking the match was £2,689 for their contribution of £978.

chart

This graph assumes that a member does not pay contributions via salary sacrifice

Member’s salary Investment performance addition
£30,000 and have taken the match £42
£40,000 and have taken the match £56
£60,000 £68
£60,000 and have taken the match £152
£80,000 £348
£80,000 and have taken the match £460

Stay up-to-date

This month’s members’ newsletter includes introductory articles on investment performance and the first-year performance of the USS Investment Builder. Together, these articles provide an insight into topics of relevance to all active USS members, you can also learn how you can take a more active role in your retirement savings and planning.

My laptop

Register for My USS to make additional contributions to the USS Investment Builder.


Find out more about how we measure the performance of our investments by taking a look at the further reading options below:

Important note: This publication is for general guidance only. It is not a legal document and does not explain all situations or eventualities. USS is governed by a trust deed and rules and if there is any difference between this publication and the trust deed and rules the latter shall prevail. Members are advised to check with their employer contact for the latest information regarding the scheme, and any changes that may have occurred to its rules and benefits. Any references to the trustee or USSL in this document means Universities Superannuation Scheme Limited, the trustee company of Universities Superannuation Scheme and any references to the scheme or USS means Universities Superannuation Scheme. As you review this information, please keep in mind that past performance is not necessarily a guide to future performance. The value of investments may go down as well as up and the return on your investments is not guaranteed.

Was this information helpful?

Rate this Article:



Average rating:

This item has 18 ratings.