Transcript PowerPoint Presentation - University of Leeds UCU

USS Pensions 2014
You future pension may change
What is being proposed by USS and the employers?
Start
USS Pensions 2014
First, let’s go back to 2011
We had a ‘final salary’ scheme for everyone
‘Final salary’ is the ‘defined benefit’:
your pension is related to salary at retirement
USS Pensions 2014
We had a ‘final salary’ scheme for everyone
October 2011
The employers imposed a split from October 2011
Final Salary
Final Salary
Career Average
USS Pensions 2014
Existing members continued with a ‘final salary’ scheme
October 2011
New entrants were put on a ‘career average’ scheme
Final Salary
Final Salary
Career Average
‘Career average’ is also a form of ‘defined benefit’ scheme
USS Pensions 2014
Benefits earned in the ‘final salary’ scheme changed
October 2011
From October 2011, they would no longer rise fully with inflation
Final Salary
Final Salary
Career Average
They would rise with inflation to 5% CPI, then at half CPI to15%
In other words, their value will not increase with inflation over 5%
USS Pensions 2014
October 2011
The ‘career average’ scheme did not
have the most favourable terms
Final Salary
Final Salary
Career Average
USS Pensions 2014
October 2011
At the time, UCU argued that if the ‘career average’ scheme
was applied to some, it would before long be applied to all
Final Salary
Final Salary
Career Average
So what is now proposed to change in 2015?
USS Pensions 2014
April 2016 ?
Firstly, employers propose to end ‘final salary’
and put everyone on ‘career average’
Final Salary
Career Average
Career Average
‘Final Salary’ members’ benefits will be calculated as though
they have left the scheme
USS Pensions 2014
But you will only be able to accrue the new ‘career average’
benefits up to a £50,000 threshold
Defined Contribution
Career Average
Above that threshold, your contributions will go into
a ‘defined contribution’ scheme
USS Pensions 2014
By definition, you know in advance how your pension
from a ‘defined benefit’ scheme (such as ‘career average’
or ‘final salary’) will be calculated
Defined Contribution
Career Average
You cannot know in advance what you will receive from a
‘defined contribution’ scheme
USS Pensions 2014
If you wish to pay AVCs
(Additional Voluntary Contributions)
these will be to a maximum of 1% and
will go into the ‘defined contribution’ section
AVCs
Defined Contribution
Career Average
USS Pensions 2014
Not only will your contributions over a certain salary level
create an unknowable portion of your pension
in a ‘defined contribution’ scheme
Defined Contribution
Career Average
the increase in benefits that will accrue in the ‘career average’
base scheme will be capped if inflation (CPI) goes over 5%.
USS Pensions 2014
Career Average
the increase in benefits that will accrue in the ‘career average’
base scheme will be capped if inflation (CPI) goes over 5%.
20%
15%
Benefits will increase
with CPI up to 5%
10%
5%
0%
Then at half CPI to
15%
And not at all above
15%
USS Pensions 2014
April 2016 ?
Monthly contributions will change
7.5%
6.5%
Final Salary
Career Average
Defined Contribution
Career Average
6.5%
‘Final salary’ members currently pay more,
Everybody could pay 6.5% from the point of change
USS Pensions 2014
April 2016 ?
The employers have accepted they should
return to paying18% contributions
Final Salary
Defined Contribution 12%
16%
Career Average
Career Average
18%
However, they propose to pay less into the
‘defined contribution’ portion of your pension
USS Pensions The final salary scheme2014
will close
Summary
FS benefits to date arrested
at salary point 1 October
2015
All members placed in a career average scheme
Benefits rise with CPI up to 5%, half CPI to 15%, 0 after
15%
Employee monthly contributions above a salary threshold
paid into a ‘defined contribution’ arrangement
AVCs to be paid into the ‘defined contribution’
arrangement
Employer contributions increase
Employee contributions certain to increase
Employer contributions above a salary threshold to drop
to 12%, and added to the ‘defined contribution’
Defined Benefits:
arrangement.
Final Salary
Career Average
Defined Contribution
USS Pensions 2014
Consequences - Times Higher Calculations
Multiply the annual loss by life expectancy in retirement
urce: http://www.timeshighereducation.co.uk/news/uss-reforms-seen-as-radical-attack-on-pensions/2015786.art
USS Pensions 2014
Consequences - UCU
Multiply the annual loss by life expectancy in retirement
Source: http://www.ucu.org.uk/7216
USS Pensions 2014
Begin again
Return to UCU pages
Source of all data and assumptions: http://www.employerspensionsforum.co.uk