The Universities Superannuation Scheme (USS) Trustee has now implemented the Universities UK (UUK) package of reforms to conclude the 2020 valuation of the pension scheme.
Employer and member contributions are 9.8% of salary for members and 21.6% of salary for employers from 1 April 2022 – with guaranteed defined benefits remaining at the heart of the scheme. This represents an increase of 0.5% of salary in employer contributions, and 0.2% of salary in members’ contributions from the 2018 valuation.
The salary threshold up to which guaranteed defined benefits are built up would reduce from £60,000 to £40,000 per annum. Members earning above the threshold would receive a 20% defined contribution into their individual pension pot.
University employers have agreed to make significant financial commitments to the scheme, known as covenant support, equivalent to an additional £1.3 billion per annum to support the UUK proposals.
Following consultation feedback from USS scheme members which identified the proposed 2.5% cap on future inflationary increases as a concern, employers have agreed to pay an additional 0.2% of salary in contributions (on top of the 0.3% of salary increase which has applied from 1 October 2021) to defer the application of the cap until at least the next valuation.
The package also proposes work to address the scheme’s high opt-out rate, which sees around 20% of members choosing not to join the scheme and losing out on the 21.1% employer contribution, by giving eligible members the choice of a new lower contribution option. It also proposes a major new review of the scheme’s governance, and exploring moves to a conditional indexation model, which pegs a part of annual pension provision to the performance of scheme funds, via a working group of members’ representatives, employers, and USS.