Planning for the future if you're no longer paying in to USS

Read our top tips on making a financial plan for your future

What you do now, could have a big impact on what happens when you retire.

Top tips

In your 40s and 50s, you probably have a number of competing financial priorities. So, now is the time to give some serious thought to your financial plan and how saving for retirement fits in with this.

You have benefits within USS, so it’s worth reviewing where you are at, what you need and coming up with a basic financial plan.

1. Look at what you’ll need

First thing to do is look at what you’ll need when you retire, the PLSA retirement living standards gives you an estimate of the kind of income you’ll need when you retire, based on what lifestyle you want.

2. Look at what you’ve got

You’ve made some contributions into the Retirement Income Builder, the defined benefit part of USS. Even though you’re no longer paying in to USS, the Retirement Income Builder gives you a guaranteed income for life and a tax-free lump sum (up to HMRC limits) when you retire. For every year you paid into USS you built a block of pension based on an accrual rate used at the time you were paying into USS. The pension you built up has been banked and increases in line with inflation (subject to certain caps), giving you an element of inflation protection.

Members who are paying in to USS will also get life cover. This means your beneficiaries may get a lump sum of three times your salary and a pension too. So, your USS pension will also help take care of loved ones. If you left USS but are still in USS-eligible employment, you can rejoin and regain this benefit (subject to certain criteria). Find out what benefits your loved ones could get while you're not paying in to USS.

To get an estimate of what your pension might give you when you retire, log in to My USS and use the Benefit Calculator.

It’s a good idea to also review any other pension benefits you have outside of USS and when you can start taking them to assist you with your financial planning.

3. Your flexible savings pot

You may have savings in the Investment Builder – the defined contribution part of USS – which is a flexible savings pot, that you can take as early as 55 (rising to 57 in 2028 for some members), without retiring. If you’ve either transferred a pension to USS, made additional contributions or earned above the salary threshold you will have paid into the Investment Builder.

Log in to My USS to review any Investment Builder savings you have and to check your money is invested where you want it to be and that your Target Retirement Age (TRA) is right for you. Your TRA is important if you’re in the Do It For Me option because we use this to determine when to start moving your investments to lower risk funds as you get closer to retirement.

To review the options you have with your Investment Builder savings, you can use the Benefit Calculator in My USS.

4. Make a financial plan

If you think you might need to save a bit more for the retirement you want, think about looking at where that fits with your competing financial priorities and goals. In other words, financial planning.

Financial planning may sound daunting, but time spent focusing on your finances today could be valuable later down the line.

Start by identifying all your savings goals, not just retirement ones but what you want to achieve as a whole with your money, which might be building a savings pot for your kids, paying off your mortgage or simple lifestyle goals like going on holiday. Then it’s worth breaking them down into short terms goals (what you want to do in the next year), medium term (next five years) and long-term (what you’re aiming at beyond five years, like retirement).

Once you’ve set your goals, it’s time to prioritise them, and how much you can save towards what you want to achieve.

Published: 24 October 2024