Commenting on the latest quarterly monitoring statistics for the end of December 2022, a spokesperson for Universities UK on behalf of USS employers, said:
“We welcome the latest quarterly monitoring figures from the USS Trustee, which continue to show a significant improvement in the scheme’s financial position in a remarkable shift since the last valuation. There is still considerable volatility due to current economic conditions, but it is clear that the sharp and unexpected rise in interest rates together with benefit changes – made as part of the response to the difficult 2020 valuation – and the substantial employer (covenant) support for USS have all contributed to the scheme’s finances now being on a much stronger footing.
“Alongside the monitoring figures, the USS Trustee has advised stakeholders that –
‘assuming there are no unforeseen market movements between now and the valuation date... stakeholders might want to plan for the 2023 valuation on the basis that the overall contribution rate required for the current level of benefits is unlikely to be in excess of 20% of payroll. Similarly, they might also want to plan on the basis that the rate that would be required for the pre-1 April 2022 benefit structure going forward is unlikely to be in excess of the current cost of future service (25.2%).'
“We are committed to working with scheme stakeholders to achieve greater long-term stability, and to agree a solution where benefits and affordable contributions are adjusted through a pre-agreed framework, based on the USS valuation process. It is hoped that this might allow for changes to the scheme which could include a possible return to a comparable level of future benefits as existed before the April 2022 changes, a reduction in costs for members and employers, or even both. It will also avoid future contention and dispute, and help to build trust and confidence in the scheme. We look forward to working in partnership with UCU to achieve this for the benefit of all stakeholders.
“The valuation process, which must take place at least every three years, involves a review of the scheme’s finances at a point in time. We took necessary action at the last (2020) valuation to reduce benefits and increase contributions when the USS Trustee would otherwise have required contributions totalling 43% (even with the covenant support package). This would have been unaffordable for both employers and members. The signs are that the position is much better and, if confirmed, employers will want to ensure that scheme members benefit from that improvement, and both employers and members benefit from reduced contribution costs. We have repeatedly said that we would make positive changes to the scheme – if the USS Trustee’s figures allow it – and our priority is to work with the University and College Union (UCU) and the USS Trustee to bring this about as soon as possible.
Notes to editors
- At the last scheme valuation as at March 2020, the USS trustee reported a significant deficit in the scheme and a substantial increase in the cost of future benefits, which required changes to be made in terms of both higher contributions and reductions in future benefits (the latter implemented from April 2022).
- The USS employer contribution rose to 21.6% of salary in April 2022 which is three times higher than the average employer contribution rate among the FTSE 250 companies, p11, WTW Defined Contribution and Savings Survey, 2022.