Transcript Document
Revaluation of USS Pension Scheme – Staff Briefing April 2014 Richard Benson, Jo Brake-Oakes, John Garnham Improving health worldwide www.lshtm.ac.uk USS – overview of the scheme • USS is one of the largest pension schemes in the UK with 300,000 members and around £40bn of assets • Established in 1974 as the national pension scheme for HE • Mutual or “last man standing” scheme with 390 employers – HE institutions, FE colleges, learned societies and others • USS is an independent company governed by a board of trustees, including: • 4 members appointed by Universities UK • 3 members appointed by UCU • 3-5 independents appointed by the board • Any proposals to change the rules of the scheme will be considered by the Joint Negotiating Committee of 11 members: • 5 appointed by Universities UK • 5 appointed by UCU • 1 independent, who acts as chair USS – overview of the scheme • USS is a defined benefit scheme with two sections: Final salary section Open to existing members Career revalued benefits section Open to members joining after Oct 2011 Contributions Contributions Employer – pays 16% of salary Individual – pays 7.5% of salary Employer – pays 16% of salary Individual – pays 6.35% of salary Benefits Benefits Pension = final pensionable salary x 1/80 x pensionable service Pension = average pensionable salary x 1/80 x pensionable service + Tax-free cash = 3 x pension + Tax-free cash = 3 x pension USS – revaluation • Pensions’ legislation requires all defined benefit schemes to conduct an actuarial valuation every 3 years • The valuation will assess the present value of the assets and liabilities of USS, including: • • average age of the active membership expected investment returns • contributions from employers and employees • expected increases in pensionable salaries • Will contain a large number of assumptions of how these factors & other may change over time • Small changes in assumptions can have a big impact on the size of the deficit • USS trustees will need to agree a Financial Management Plan with the Pensions Regulator to eliminate the deficit over a period of years • The Regulator will be looking at: • are the assumptions reasonable? • are employers able & willing to take the steps needed to reduce the deficit? • sustainability, including a new objective “to minimise any adverse impact on the sustainable growth of an employer”. USS engagement paper on scheme funding, January 2014 Benefit Changes Options? USS Valuation timeline Overview and key milestone 2014 Mar Apr May Engagement Jun Jul Aug 2015 Sep Finalise the Financial Management Plan Preliminary Financial Management Plan to the board Oct Nov Dec Jan Feb Mar Formalise the valuation assumptions – employer consultation Valuation assumptions decided for consultation Technical provision, summary funding statements, statement of investment principles, schedule of contributions, recovery plan Apr May Jun Complete valuation 30 June 2015 deadline for valuation