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Get under the hood of your USS pension

You might be new to USS or maybe you’ve been a member for a while and you’ve not given it much thought recently, but you really are part of something special

There's a host of benefits and some great options to help you save for the future.

So, let’s get under the hood and have a tinker with some of the features…

Our size and influence

The first thing you’ll see is that USS is the biggest private pension scheme in the country, but why is this good news for you as a member? Our scale gives us a seat at the table in some of the most important boardrooms around – wherever we invest on your behalf, we can make a difference to the corporate agenda.

And what about the tax efficiencies?

Your pension’s a really tax-efficient way to make sure future you has money in your retirement. The tax relief you get is based on the rate of income tax you pay – most people pay the basic rate of 20%, so that means every £100 you pay into your pension, you pay £20 less in income tax. If you’re a higher-rate or additional-rate taxpayer, it works the same way, with your tax relief based on the rate you pay.

While you get a tax saving upfront, you will be taxed on the pension you receive once you retire, but you can take up to 25% of your pension as a one-off, tax-free lump sum, and you’ll only pay tax on any monthly retirement (and any other) income that’s above your personal allowance – like you do now with income tax.

It doesn’t stop there, your employer makes a pretty hefty contribution on your behalf: 21.1% of your salary, in fact, towards your pension and running USS.

What you get

Then, there’s the scheme itself. USS is a hybrid pension scheme, which means you have access to a defined benefit pension and a defined contributions savings pot.

The Retirement Income Builder (the defined benefit part)

This bit’s important, all USS members join the Retirement Income Builder, so everyone has access to a pension for life in retirement (and a cash lump sum that’s tax-free up to a certain amount). In the Retirement Income Builder, you and your employer contribute, and your pension’s based on your salary (up to the salary threshold) each year you’re a member.

The pension you build up in the Retirement Income Builder is banked each year, and increased in line with inflation (up to a certain amount), and once you retire, you’ll get an income for life – you can estimate what you’ll get using the Benefit Illustrator.

Get right under the hood

There’s even more to USS than a pension for life. Should the worst happen, there’s also life cover while you’re paying into USS, and pension benefits for your loved ones. You may also be eligible for benefits if you have to stop working due to illness or injury.

The Investment Builder (the defined contribution part)

You’ll join the Investment Builder if you earn above the salary threshold of £59,883.65 for 2021/2022, if you make additional contributions or if you transfer funds from another pension into USS.

As the defined contribution part of USS, it’s flexible, and it gives you a range of choices about how you build, manage and use your savings.

Contributions to the Investment Builder are invested in a range of funds, and combined with the returns on those investments, they build your savings pot. If you like, we can manage those investments for you or you can choose to do it yourself.

Then, when you want to use your savings pot, which you can do from the normal minimum pension age (55 rising to 57 in 2028), you have a range of options to suit you.

So, what next?

Whether you’re a new member or have been building your USS pension for a while there are definitely a few things that are worth doing now.

  1. Register for My USS so you can manage your pension online.
  2. Look after your loved ones by completing your Expression of Wish and Registration of potential dependant forms, which you can do in My USS.
  3. If you’re in the Investment Builder, set your Target Retirement Age, so we know when you’re planning to use your Investment Builder savings – that way, we can manage your investments in the way that’s right for you, or if you choose to make your own investment choices, we can write to you at key times to remind you of what’s coming up.
  4. Watch some films and do some reading, to find out more about what you get from your USS membership.
  • If you’re a new joiner, you can watch the two-minute guide to pretty much everything you need to know on Day One.
  • And if you’ve been a member for a little longer, you can check out some resources that will help you make the decisions that are right for you now and in the future.
  • If you really want to find out everything about USS, make a pot of tea and read Your guide to USS.

Published: 6 October 2020