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25 July 2023

USS publishes 2023 Report and Accounts

  • £75.5bn – total value of assets under management (as at 31 March 2023)
  • 8.4% p.a. – how much USS’s investments outperformed the DB liability proxy per year, over five years
  • £7bn – estimated DB surplus (based on monitoring of the 2020 valuation)
  • £137m – independent benchmarking of how much lower the scheme’s annual investment management costs were v its peer median
  • 90% – proportion of employers who rate their relationship with USS as good/very good

Universities Superannuation Scheme has published its annual Report and Accounts, covering the financial year to 31 March 2023 – a year marked by significant volatility across financial markets.

At the same time, the scheme has published its latest Task Force on Climate-related Financial Disclosures (TCFD) report.

USS membership grew by more than 27,000 to 528,074 (223,229 active, 220,506 deferred, 84,339 retired). USS is a hybrid scheme. All members of USS are part of the scheme’s defined benefit (DB) section.

According to the Pension Protection Fund, USS members account for almost a quarter of the fewer than one million people in the UK who are still actively paying into private DB schemes. USS is in the 10% of remaining DB schemes that are open to new members. Around 168,000 members had supplementary defined contribution (DC) savings with the scheme at the end of March 2023.

Total assets under management were £75.5bn. The DB fund stood at £73.1bn (against estimated liabilities of £66.1bn, based on monitoring of the 2020 valuation), while its DC assets totalled £2.4bn (Including £0.2bn of Prudential AVCs).

With falls across all major asset classes, it was a tough year for investors. Supply disruptions from Covid-19 and political upheaval, both in the UK and globally with the war in Ukraine, contributed to inflationary pressures, volatility in financial markets, and rising interest rates – all of which led to the value of the scheme’s investments falling in the year.

However, rising interest rates reduced the value of the scheme’s DB liabilities to a much greater extent. The scheme has significantly outperformed its DB liability proxy: by 8.4% per annum over the five years to March 2023, and by 5.5% per annum over 10 years. This has driven a notable improvement in the scheme’s indicative funding position.

For the first time since 2008, USS is now reporting an estimated DB surplus of around £7bn (based on monitoring of the 2020 valuation, to be formally updated by the 2023 valuation), which would make it 111% funded on a Technical Provisions basis.

The trustee is working closely with stakeholders and the Joint Negotiating Committee to complete the 2023 valuation at pace, with the aim of introducing any benefit and/or contribution changes proposed by the committee by April 2024.

The USS Growth Fund, in the DC part of the scheme, averaged a return of 5.8% p.a. over the five years to 31 March 2023. It was not an easy year for DC investments across the industry – but when USS’s DC investment advisor reviewed the USS Growth Fund against 16 UK DC master trust default growth fund returns, USS Investment Management’s (USSIM) diversified portfolios performed better than almost all of them.

This was driven, primarily, by its allocation to private market assets. USS was one of the first pension schemes in the country to introduce private market assets to its DC funds – and an employer subsidy means members currently pay no management fees on investments from contributions.

By managing most of its investments in-house, USS saves money compared to the expense of external management. According to the latest independent analysis by CEM Benchmarking, the scheme’s annual investment management costs were the equivalent of £137 million a year lower than the peer median1. This is just one of the ways USS assesses its value-for-money proposition.


TCFD is an industry-led group that helps companies and their investors understand their financial exposure to climate risk. While the carbon emissions intensity of USS’s investments has reduced by 21% since 2019, the scheme still has a long way to go to reach Net Zero and will continue to actively engage with the companies it invests in to push for change.

Dame Kate Barker, Chair of the USS Board, said: “Our latest Report and Accounts covers a year of major upheavals in the global economy and in the UK’s financial markets; a year in which policymakers’ efforts to tackle above-target inflation reversed more than a decade of declining interest rates.

“It was a tough year for investors. But our investments performed comparatively well and rising long-term interest rates reduced the value of our defined benefit liabilities at a rate that more than offset the fall in the value of our assets.

“The performance of USS Investment Management again evidences the enduring value to the scheme of having an in-house investment team capable of responding quickly and effectively to changing dynamics, and always with the long-term needs of the scheme in mind.

“Against a backdrop of pressures caused by the rising cost of living, it is good to point to the prospect of an improved funding position. The trustee’s updated funding proposals for the 2023 valuation could lead to lower contribution rates than are being paid today – and a significant surplus.”

Bill Galvin, USS Group Chief Executive, said: “Through all the change and challenge of the past year, some things remained constant. I am pleased we maintained our high standards of service, with very good turnaround times on key processes driving positive feedback.

“Our strategic decision to manage more of the scheme’s investments in-house, at far less cost than the fees charged by commercial fund managers, also continues to be rewarded – with the latest independent analysis showing our investment management costs were £137m a year lower than the peer median.

“We will continue to work to demonstrate that all the decisions of the trustee are made in the interests of the members and beneficiaries of the scheme, and the priority the trustee needs to place on the security of the USS pension promise.”

Balanced scorecard assessment

As noted in the scheme’s 21/22 Report and Accounts, the performance of USS’s in-house investment team (USSIM) has been assessed by the trustee’s Investment Committee on a balanced scorecard basis.

This reflects the trustee’s belief that USSIM’s investment performance should not be assessed one-dimensionally using performance versus a benchmark but, instead, should include a range of factors, including ESG considerations, and other quantitative risk and return metrics.

In assessing USSIM’s performance over the calendar year (2022), the Investment Committee viewed the following areas to be particularly strong:

  • Handling of the LDI crisis, where there was limited impact on USS
  • Adding significantly and opportunistically to USS’s DB interest rate & inflation hedge ratios
  • DB returns relative to comparators, and scheme funding improvements
  • Strong ‘active management’ and performance in Private Markets in particular
  • Exceptional investment advice to the trustee

Other notable developments in 2022/23

1According to the latest independent analysis by CEM Benchmarking; investment management costs (as a proportion of assets under management) of schemes of a similar size and complexity to USS, covering calendar year 2021