Over the last few weeks we have had an independent pensions expert running presentations for staff, setting out the latest developments related to the Universities Superannuation Scheme (USS) valuation.
In the presentation, Brendan Mulkern sets out the USS position following the 2017 valuation, the existing benefit structure and the potential areas in which changes have been discussed. He then explains the latest developments, the role of the Joint Expert Panel (JEP) and the USS cost sharing Rule 76. You can view the presentation here and scroll forward to 53’:05” for the relevant section.
What is Rule 76?
The USS Trustees have an obligation to complete the current valuation process. Under the USS rules, if there is no agreement about benefit proposals, then the ‘cost-sharing’ Rule (76.4-8) must take effect. This process will run in parallel with the work of the JEP and the implementation of any subsequent Joint Negotiating Committee (JNC) decision.
Under cost sharing, any increase to the contribution rate required by the Trustees is split 35:65 between members and employers respectively. This will potentially mean an increase in contributions for both members and employers. The full potential increase of 3.7% for members and 6.9% for employers will not be applied straight away but progressively over time from 1 April 2019. The Trustees must consult with members prior to implementation.
Members’ consultation
USS have now published for members the proposed implementation of the cost sharing rule. They will be consulting members in September. The key elements are:
- Current defined benefits to remain the same, but contributions required to fund them to increase
- Member contributions to increase from 8% to 8.8% of salary from 1 April 2019
- Further increases to member contributions to be phased in at 1 October 2019 (10.4%) and 1 April 2020 (11.7%)
- Employer contributions to increase to 19.5% of salary from 1 April 2019, followed by 22.5% from 1 October 2019 and 24.9% from 1 April 2020
- 8% of member contributions from salary above the defined benefit threshold (2018/19: £57,216.50) to continue to be saved in the USS Investment Builder, with the excess of these member contributions supporting defined benefits in the USS Retirement Income Builder
- Employers’ contributions to the USS Investment Builder on salary above the threshold to remain at 12%
- The 1% employer match into the USS Investment Builder to be discontinued from 1 April 2019
The proposals in full are on the USS website.
In the next few days, members/eligible members will be emailed information about the consultation regarding the implementation of Rule 76. This consultation will be in parallel with, and entirely separate to, the work of the JEP.
What about the revaluation of the scheme by the JEP?
It is anticipated that the JEP will present their report to the Joint Negotiating Committee (JNC) – comprised of UUK and UCU – in September 2018. Negotiations will then take place and recommendations made to the USS Trustees and the Pensions Regulator. Any potential future changes to the Scheme would need to be consulted upon with members. It is unlikely that any new proposal will be implemented before April 2019.
More information about USS can be found on the Finance SharePoint site. This site also includes links to all SUSSED posts on pensions, UUK briefings and the USS 2017 valuation webpage.
