As a result of the 2023 valuation, the way members in the USS pension scheme accrue benefits will be changing from 1 April 2024.
Since 1 January 2024 employees in the USS scheme have paid lower member contribution rates of 6.1% instead of 9.8% of salary.
Summary of additional changes:
A higher accrual rate for your Retirement Income Builder benefits
The change will reintroduce the accrual rate that was in place before 1 April 2022 and would mean a higher rate of benefits would be built up in the defined benefit section of the scheme.
Currently members of the scheme get 1/85 of salary (up to the salary threshold) in defined benefit pension each year and 3/85 of salary as a lump sum on retirement. This will increase to 1/75 of salary for pension benefits and 3/75 of salary for the lump respectively (for salary up to the salary threshold)
Salary Threshold Increase
The salary threshold will increase to £70,296 from £41,004 on 1 April 2024. This means members of USS will start building up a greater proportion of defined benefits in the Retirement Income Builder (defined benefit section) and less savings in the Investment Builder (defined contribution section)
Higher Cap for future pension increases
Retirement Income Builder benefits will be subject to a higher maximum increase of 10% rather than the cap of 2.5% (which had been deferred to 1 April 2026 but applying to benefits built up from 1 April 2022).
Increases will now be applied as follows:
- Where inflation (currently CPI) is 5% or less, the increase will be matched.
- Where inflation is more than 5% but less than 15%, the increase will be 5% plus half of the percentage increase over 5%.
- Where inflation is 15% or more, the increase applied will be 10%.
A one-off benefit uplift
If you are eligible and have any period of active membership in the period 1 April 2022 to 31 March 2024, and you do not retire before 1 April 2024, you’ll receive a £215 uplift to your annual pension, plus an associated £645 retirement lump sum (subject to certain criteria).
If you’ve retired and meet the criteria, you’ll get a pension uplift of £241 per year.
Your questions answered on the one-off uplift (uss.co.uk)
USS will provide the statutory notice of the changes to members and eligible employees in early/mid-March 2024.
For more details on how these changes may impact you, please visit the following link: How will the changes impact you (uss.co.uk)
Bust the pensions jargon (uss.co.uk)