Employers Pension Fund

USS Review

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June 2011

At the USS Trustee Board meeting of 9 June changes to the scheme were confirmed. They will come into effect from 1 October 2011. The Trustee Board made the following statement:

"At its meeting on the 9 June 2011 the trustee board considered an amending deed to the rules of USS containing the proposed changes in their final form as decided upon by the Joint Negotiating Committee at its meeting on 10 May 2011.

The trustee board confirmed that it was content with the final form of the deed, which will be effective from 1 October 2011."

Media statements released by USS during the Review can be found here

May 2011

At the USS JNC meeting of 10 May the changes to the USS were approved.

The USS Trustee Board issued the following statement:

Joint Negotiating Committee agrees proposed changes to USS.
 
The USS Joint Negotiating Committee (JNC) met on 10 May 2011 to give further consideration to the final form of the proposed scheme changes. This meeting was called at the specific request of the trustee board following a number of earlier JNC meetings that could not proceed due to the absence of the UCU nominees which rendered the meetings inquorate.

The committee agreed the proposed changes which include the modifications to the original proposals put forward by the employers at the suggestion of the trustee board following the consultation with affected employees and their representatives. The amending deed will be recommended to the USS trustee board at its next meeting with the intention of implementation later this year.

Sir Andrew Cubie, the independent chairman of the JNC said, “Whilst I was pleased that the meeting was once again quorate, I was deeply disappointed that the employers and UCU were not able to reach agreement on these important issues. In these circumstances I was again obliged to exercise my casting vote on proposals which I believe will help to ensure the long-term sustainability of USS.”

The date of implementation of the changes will be announced in due course.

USS has produced the following summary of the agreed changes:

  Summary of changes to USS - published 10 May 2011

earlier updates

January 2011

Following the end of the formal USS members’ consultation on the 22 December 2010, a small group of four USS Board Trustees comprising of one UCU, one UUK and two independently appointed members reviewed the members’ responses. They noted that it was clear from the responses to the consultation that there were some areas of particular concern to members. These included:

The caps on inflationary increases to pensions in payment and deferred pensions;
The rejoining period for members who leave the final salary section of USS and subsequently rejoin the scheme;
The position of staff promoted into USS eligible roles

Having considered these issues, the group of four Trustees proposed a number of changes to be considered in these areas.  When the USS Group of the EPF met on the 12 January they agreed that the employers could support minor modifications to address these member concerns, which could be achieved without de-railing the key objective of reforming the scheme – to bring costs under control, so as to ensure that USS could continue to provide high quality pension benefits to both current and future members over the long term.

On the 20 January the full USS Trustee Board carefully considered all the responses to the consultation and in turn suggested to the Joint Negotiating Committee that it should support certain modifications, as supported by the USS Group of the EPF, to the planned scheme changes as follows:

• Pension increases should move in line with CPI up to a 5% threshold with a 50% slicing of increases above the 5% level up to an overall ceiling of 10% per annum, when CPI increases by 15%. The USS Board will retain the discretion to award increases above this level where scheme funding permits.
• The same level of inflationary increases will be applied to pensions in payment, deferred benefits (previously capped at 2.5% pa) and benefits built up in the CARE section of USS.
• Members of the final salary section who take a career break, for example to work with an overseas institution, will be able to re-join USS on the same terms as long as they do so within 30 months of their leaving rather than six months as originally proposed. (The majority of current members who take such a break re-join the scheme within this timescale.) .
• Support staff who are promoted into USS-eligible roles will be given the opportunity to join the final salary section of USS, subject to their having been a member of a comparable scheme since before 1 April 2011.

Why change the scheme at all?

The cost of providing the current scale of benefits under USS has risen considerably since the scheme was established in 1975. Much of this is due to increased life expectancy – on average USS pensioners receive their pension for 13 years longer than they did in 1975. The only way to make sure that USS remains affordable, for both members and employers, while continuing to be able to provide high quality benefits is to introduce reforms to benefits for future service. However, the provision of a final salary-based pension for current USS members remains. The table below presents the overall proposals.

	The modified new-look USS from April 2011
1.	A normal pension age of 65 will be introduced for new entrants and for the future service of existing members.
2.	Existing members over age 55 will be exempt from the changes to the normal pension age.
3.	The normal pension age will be linked to increases to the state pension age.
4.	A flexible retirement scheme will be introduced which will be available to members from age 55.
5.	The employee contribution rate for members of the final salary section will increase to 7.5%.
6.	Pensions in payment and CARE benefits will be inflation proofed in line with increases in the Consumer Prices Index (CPI)* subject to a 10% inflationary cap.
7.	Pensions in deferment will be inflation proofed in line with increases in the Consumer Prices Index (CPI)* subject to a 10% inflationary cap.
8.	A CARE benefits structure will be implemented for new entrants. The benefits will be based upon a 1/80th pension and 3/80th cash lump sum formula. (This produces a combined accrual rate of 1/64, which is comparable to similar schemes in the publicly funded sector.)
9.	The contribution rate for members of the CARE scheme will be 6.5%.
10.	Cost sharing will be introduced and any increase in the joint contribution rate - currently 23.50% (22.50% for the CARE section) will be shared 35%/65% by employees and employers respectively.

 

Redundancy

A further proposed change relates to retirement on the grounds of redundancy.  In such cases, scheme benefits would remain payable without actuarial reduction from age 55 (or earlier protected pension age) where a member with five or more years’ pensionable service retires early on the grounds of redundancy before 1 April 2013.  Where a member retires early by reason of redundancy after 31 March 2013, his/her entire benefits would be actuarially reduced although the employer will have the discretion to meet the cost of providing an improved level of pension benefit if it wishes to do so. 

A meeting of the USS Joint Negotiating Committee was set to take place on the 2 March to agree these changes. UCU declined to attend the meeting and an additional meeting 9 March 2011. The more information see the following press releases:

UCU is failing in its governance duties on USS reforms

Outcome of today's JNC: UCU continues to fail in its governance duties on USS reforms

These proposals update earlier proposals agreed in July 2010.

July 2010 proposals

The proposals listed above update those agreed on the 22 July 2010, as follows:

The JNC met on Wednesday 22 July and following the meeting it was confirmed that a package of proposals for benefit reforms from the employers would be recommended to the USS Trustees on 22 July. This conclusion was reached when independent chairman, Sir Andrew Cubie, exercised his casting vote in favour of the employers’ proposals.  This is an important step in a formal process which will include a full statutory consultation with employees once the Trustees have approved these changes.

The full EPF press release can be read at Proposals on USS reforms to be recommended to Trustees

The full USS press release can be read at Statement from USS following the meeting of the Joint Negotiating Committee

The proposals which the Trustees voted to approve are:

	Proposals
1.	A normal pension age of 65 will be introduced for new entrants and for the future service of existing members.
2.	Existing members over the age of 55 will be exempt from the changes to the normal pension age.
3.	The normal pension age will be linked to increases to the state pension age.
4.	A flexible retirement scheme will be introduced which will be available to members from age 55.
5.	The employee contribution rate for members of the final salary section will increase to 7.5%.
6.	Pension increases (for pensions in payment) will be inflation proofed in line with increases in the Consumer Prices Index (CPI)* subject to a 5% inflationary cap.
7.	Pensions in deferment will be increased by CPI* or 2.5%, whichever is the lower.
8.	A CARE benefits structure will be implemented for new entrants. The benefits will be based upon a 1/80th pension and 3/80th cash lump sum formula.
9.	The contribution rate for members of the CARE scheme will be 6.5%.
10.	Cost sharing will be introduced and any increase in the joint contribution rate of 23.50% (22.50% for the CARE section) will be shared 35%/65% by employees and employers respectively.

* This is a change from RPI as USS pensions in payment increase in line with public sector pensions. The Government announced in the emergency budget in June that from next year rises in public sector pensions will reflect increases in the CPI rather than the RPI. See USS news release 2010 Emergency Budget.

* USS issued an additional press release on the 16 July 2010 Changes to pension increases which clarifies the position on the proposed changes and also how the move from RPI to CPI will impact on USS pensioners.

A more detailed document will follow shortly

 

Earlier information on EPF proposals

As members of the USS will know, a review of the USS is taking place by the Joint Review Group (JRG).

The details of the discussions at the USS JRG were confidential. A speech to key stakeholders Sir Andrew Cubie, the independent chair, made in December 2009 described areas of change that were under consideration. 

The transcript of Sir Andrew’s speech can be accessed on the public area of the USS website via the following link:

Speech by the chairman of the Joint Review Group

On the 30 April 2010 the EPF representing the employers submitted its proposals to the JNC, which can be found in the following document. The proposal was submitted with a series of 8 appendices which can also be accessed below.

  Employers Proposals for the JNC to consider

  Employers Proposals for the JNC - Appendix 1 Supporting Statements

  Employers Proposals for the JNC - Appendix 2 Employers original proposal

  Employers Proposals for the JNC - Appendix 3 Browne Review

  Employers Proposals for the JNC - Appendix 4 JNCHES Finance and Pay Data Review

  Employers Proposals for the JNC - Appendix 5 HEFCE Report on the Sector Financial Forecasts

  Employers Proposals for the JNC - Appendix 6 The Hewitt Report

  Employers Proposals for the JNC - Appendix 7 Mercers proposals for benefit change

  Employers Proposals for the JNC - Appendix 8 HEFCE Workforce

UCU also submitted its proposals which are available on the UCU's website via the following link What were UCU's proposals.

This document is a   Comparison of EPF and UCU proposals for USS

This document is a   Summary of update of USS for HEIs

UCU has produced a series of Q&As on the USS reforms which are on the UCU website. The document contains the EPF response to these   EPF Comments on UCU Q&As

The USS released a statement which can be found via the following link: Statement from the Joint Review Group

Collated media coverage of the review can be found on this website at : Media coverage of the USS review