USS publishes 2024 Report and Accounts

Universities Superannuation Scheme has published its annual Report and Accounts, covering the financial year to 31 March 2024.

The scheme has also published its latest Task Force on Climate-related Financial Disclosures (TCFD) report.

The financial year 2023/24 saw the trustee complete USS’s latest actuarial valuation (as at 31 March 2023) ahead of the statutory deadline – with the scheme formally reporting its first surplus since 2008.

On 1 January 2024, member contributions reduced from 9.8% of pay to 6.1% – one of the lowest member contribution rates in the 50-year history of the scheme – and employer contributions reduced from 21.6% of payroll to 14.5%. On 1 April 2024, benefits were restored to pre-April 2022 levels. A one-off uplift was also applied to benefits earned between 1 April 2022 and 31 March 2024.

Notable appointments at USS in the year included Carol Young, who joined as Group Chief Executive in September, and Sandra Carlisle, who joined as Head of Responsible Investment in January.

Dame Kate Barker, Chair of the USS Trustee Board, said: “As we enter USS’s 50th anniversary year, I am pleased to report that the scheme is in good health – with a growing membership, an estimated surplus, lower contributions, and improved benefits.

“Our enduring commitment to being a responsible, long-term investor – evidenced by our latest Stewardship Report and our award-winning work with the University of Exeter on new climate scenarios – has been reinforced with our Responsible Investment Beliefs and Ambition Statement.

“We are grateful to UCU and UUK’s representatives on the Joint Negotiating Committee for their hard work on the 2023 valuation, and for working together effectively for the benefit of members. We are determined to keep working closely with our stakeholders to ensure USS can continue to thrive for the next 50 years, and beyond."

Carol Young, USS’s Group Chief Executive, said: “The past year has not been without its challenges – notably, the Capita data breach and our investment in Thames Water – and it’s important we learn from those experiences.

“The scheme’s overall direction of travel heading into its 50th year is, however, really encouraging: member and employer perceptions are improving, we’ve again achieved Customer Service Excellence accreditation, good progress is being made in respect of our net zero ambition, and our in-house investment team has delivered positive returns at a notably lower cost than its peers.

“We continue to promote the unique features of open, multi-employer DB schemes like USS in respect of the regulatory framework. We have been engaging with Government on our ability to invest at scale in productive assets. And we are working with our stakeholders to consider ways we can put the scheme on a more stable footing for the future."

Key figures

Total assets under management were £77.9bn. The defined benefit (DB) fund stood at £74.8bn against estimated liabilities of £65.6bn, based on monitoring of the 2023 valuation – giving an estimated Technical Provisions surplus, at 31 March 2024, of £9.2bn (114% funded). The defined contribution (DC) assets totalled £3.1bn.

USS membership grew by more than 26,000 to 554,251 (232,360 active, 233,938 deferred, 87,953 retired). USS is a hybrid scheme. All members of USS are part of the Retirement Income Builder, the DB part of the scheme. Around 190,000 USS members had supplementary DC savings in the Investment Builder part of the scheme at the end of March 2024.

The value of the DB fund increased by £1.7bn over the year to 31 March 2024. Equity markets across the globe performed strongly over the period despite ongoing inflation concerns. While credit markets displayed positive performance over the year, the rising interest rate environment proved to be a drag on government bonds. However, the estimated value of USS’s DB liabilities continued to fall materially, improving the funding position. The scheme outperformed its DB liability proxy by 10.8% per annum over the five years to March 2024, and by 5.6% per annum over 10 years.

Compared with the prior year, this was a more favourable period for DC investments across the industry, with returns being positive across the board. The scheme’s DC funds recorded strong returns over the 12 months to 31 March 2024. Most of the ‘Let Me Do It’ (self-select) funds matched or outperformed their respective benchmarks over the period.

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 £121 million, or 35%, a year lower than the median global peer pension fund . This is just one of the ways in which USS assesses its value-for-money proposition.

Task Force on Climate-Related Financial Disclosures (TCFD)

TCFD is an industry-led group that helps companies and their investors understand their financial exposure to climate risk. The emissions intensity of USS’s non-sovereign investments is now 39% lower than its 2019 baseline, ahead of its 2025 interim net zero target. You can read more here.

Other notable developments in 2023/24

• USS won the Judges’ Choice Award at the World Pensions Summit’s Excellence and Innovation Awards 2023 for its work with the University of Exeter – No Time to Lose: New Scenario Narratives for Action on Climate Change
• USS published its Responsible Investment Beliefs and Ambition Statement
• USS achieved the Customer Service Excellence (CSE) accreditation for the second year in a row. In its latest annual assessment, USS was recognised in three areas as having ‘Compliance Plus’ standards.

¹According to the latest independent analysis by CEM Benchmarking; investment management costs (as a proportion of assets under management) after adjusting peers' costs to reflect our asset size and mix, covering calendar year 2022.