Valuation update: Progress so far and next steps

Continuing the valuation work

As we start the New Year, we’re continuing to work hard with all the scheme’s stakeholders, including the representatives of members and employers, and The Pensions Regulator, to complete the 2020 valuation.

This work will go on well into 2021, as there is a number of steps that we are required by law to complete. We remain focused on delivering the pension promises made to you, our members, and supporting the scheme’s sustainability so you continue to receive pensions that can form the bedrock of your plans for the future.

Facing the challenges

While the advice we’ve received shows that the Higher Education sector remains financially resilient, the cost of maintaining our scheme is a growing challenge.

Defined benefit pensions, like the Retirement Income Builder, are rare because the cost of maintaining them increases in line with inflation and factors like life expectancy in retirement – and the average USS member can expect to outlive the UK average.

We must also consider economic conditions now and what they might look like in the future, and the signals coming from financial markets suggest investment returns will be lower in future than we expected in the past.

If we expect investments to generate less income over the long-term than we assumed in the past, our members’ pensions are at risk of being under-funded, and as Trustee of the scheme it’s our job to make sure that the pension promises made to our members by their employers are kept.

Working with stakeholders

We consulted with Universities UK (UUK) on key aspects of the valuation – the ‘technical provisions’ – last autumn. This consultation asked for employers’ views on the financial support they were able and committed to providing to USS. This is vital to determining the contributions needed to pay pensions and other benefits promised to members. We received UUK’s response to the consultation in November, and we’ve been considering it carefully since, alongside the latest updates from our advisors.

Next steps

Shortly, we’ll be setting out our conclusions on the funding position of the scheme and the cost of providing the benefits currently offered to our members, based on the advice of the Scheme Actuary.

We’ll share this information with the Joint Negotiating Committee (JNC) – an independently chaired group made up of an equal number of representatives from the University and College Union (UCU) on behalf of members, and UUK on behalf of employers.

As Trustee, we are not involved in setting the benefits promised to our members nor on the structure of the scheme. Nor do we decide how contributions are split between our members and employers.

It’s the JNC’s job to decide how any increase to the overall contribution rate will be shared between members and employers and/or whether benefits should change.

Throughout this process, we’ve also been working closely with The Pensions Regulator, to ensure that we comply with the laws and regulations that govern pensions.

Keeping you informed

We’ll continue to keep you up to date with developments in our emails, via our website and on our Facebook group.

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Published: 19 January 2021