In May 2021, Universities UK (UUK) received strong employer backing for a package of reforms, as an affordable and viable option to finalise the USS 2020 valuation that could avoid damaging contributions of between 42.1% and 56.2% needed to retain current benefits.
UUK and its actuarial adviser Aon considers it feasible to provide a continued hybrid structure in the order of: a pension accrual rate of 1/85th of salary (with 3x lump sum), a Defined Benefit salary threshold of £40,000 and indexation capped at 2.5% per annum, while retaining a Defined Contribution element of an overall 20% of salary above the threshold, at the current contribution rate (30.7% of salary). The package also includes a commitment to explore whether alternative scheme designs, including Conditional Indexation, could make the scheme more sustainable in the longer-term and provide better value, the development of a more flexible and lower-cost option for members to help address the opt-out rate, and to immediately begin work on a governance review of USS.
However, the USS Trustee subsequently stated that it considered the indicative benefits could be provided for an overall cost of 31.2% of salary (therefore, a rate 0.5% higher than current contributions). To reach this price the USS Trustee sought further requirements as part of its ‘counter proposal’ for a covenant support package.
UUK sought the direction of employers, through a short consultation from 18 June to 5 July 2021, on potential modifications to the indicative outcome of the 2020 valuation. The majority of respondents, representing 94% of the active membership of the scheme, indicated they could support the USS Trustee’s counter proposal and provide backing for the modified valuation outcome.
The full analysis reports can be downloaded below.