Proposed Merger of OUSS with USS

Miles Hedges Finance Director 8 December 2003 1

Agenda

• Reasons for the proposal • Process • Timescales • Comparison of the two schemes • What happens next?

• Your questions 8 December 2003 2

Reasons for the Proposal

• Benefits for staff • Benefits for the University • Cost to the University 8 December 2003 3

Benefits for Staff

• One scheme for everyone • Eliminates the promotion problem • Allows staff greater mobility between universities • Provides security of a national pension scheme 8 December 2003 4

Benefits to the University

• Greater stability of its future pension contributions • Greater stability of its reported pension costs • Remove administrative burden of dealing with more than one pension scheme 8 December 2003 5

Cost to the University

• The University is willing to pay a premium in order to achieve the benefits for staff and itself • There is a limit to the amount of the premium that can be afforded 8 December 2003 6

Process

A long and complex process, involving: • The University Council – merger approved in principle up to a given financial cost • USS Trustees – the merger process and template has already been approved in principle • OUSS Trustees – have to be satisfied that the merger is in the best interests of members • OUSS Members – have to be satisfied that the merger is in their best interests 8 December 2003 7

Process

• Discuss proposals with trade unions • Put project team in place • Inform staff – including this meeting • Negotiate terms with USS • Take legal advice – both University and OUSS Trustees • Take actuarial advice

This is a long and complex process

8 December 2003 8

Timescales

• Sep 2003 – Council decision in principle • Oct 2003 – commenced discussions with trade unions • Nov 2003 – project team formed; letter to all staff in OUSS • Dec 2003 – open meeting for all staff; discussions with USS • Jan 2004 – continued consultation with staff • Mar 2004 – target date to agree principles of merger • Jul 2004 – target date to complete merger if terms and financial conditions are right 8 December 2003 9

Comparison of the two schemes

USS • National scheme • Security based on HE sector as a whole • Retirement age 65 • Option to retire from active service at 60 OUSS • Local scheme • Security depends on a single employer • Retirement age 65 • Option to retire from 60 8 December 2003 10

Comparison of the two schemes

USS • Pension = 1/80 th of salary for each year of service PLUS • Lump sum of 3/80 th salary for each year of of service • Can convert lump sum into pension OUSS • Pension = 1/60 th of salary for each year of service • Can convert pension into lump sum up to Inland Revenue limit 8 December 2003 11

Comparison of the two schemes

USS • Dependent’s pension = 1/160 th for each year of service • Lump sum death in service benefit = 3 x salary • Ill health pension = full service to normal retirement date OUSS • Dependent’s pension = 1/120 th for each year of service • Lump sum death in service benefit = 2 x salary + refund of contrib’ns • Ill health pension = service to date + 5 years 8 December 2003 12

Comparison of the two schemes

USS • Employee’s contribution = 6.35% less tax relief • Maximum pension increase = RPI increase OUSS • Employee’s contribution = 6.00% less tax relief • Maximum pension increase = RPI up to a maximum of 5% in any one year 8 December 2003 13

UK INFLATION RATE: 1948 to 2003

30 25 20 15 10 5 0 8 December 2003 Jan-58 Jan-68 Jan-78

Date

UK INFLATION RATE Jan-88 Jan-98 14

Pension After 10 Years at Varying Inflation Rates

£25,000 £20,000 £15,000 £10,000 £5,000 £0 OUSS Female OUSS Male USS Both 2.50% 5%

Annual Inflation rate

10% 8 December 2003 15

£18,000 £16,000 £14,000 £12,000 £10,000 £8,000 £6,000 £4,000 £2,000 £0

Pension After 10 Years at Varying Inflation Rates

OUSS Female OUSS Male USS Both 2.50% 5%

Annual Inflation Rate

10% 8 December 2003 16

Pension After 10 Years at Varying Inflation Rates

£14,000 £12,000 £10,000 £8,000 £6,000 £4,000 £2,000 £0 OUSS Female OUSS Male USS Both 1 2

Annual Inflation Rate

3 8 December 2003 17

£7,000 £6,000 £5,000 £4,000 £3,000 £2,000 £1,000 £0

Spouse's Pension After 10 Years at Varying Inflation Rates

1 2

Annual Inflation rate

3 OUSS USS 8 December 2003 18

Comparison of the two schemes

• Merger is the last stage in a long process • Many changes have been made in the past to bring benefits together – generally these involved increasing OUSS benefits but not always • Remaining changes involve some measure of trade-off – in the same way as buying an insurance policy buys peace of mind if things go against you 8 December 2003 19

What happens next?

Communication plan: • Letter to you • Today’s meeting • Your questions and our responses • Regular progress reports Key dates: • March – agree merger principle • August – start of your USS membership 8 December 2003 20

Your Questions

• To the panel now – Hedges Philip Marsh, Joe Devlin & Miles • Information and questions and their responses will be posted on Personnel intranet • Email to [email protected]

• To your trade union representatives 8 December 2003 21