The Proposals in Detail

Overview

At its meeting in May 2023, the JNC agreed to consult on improving the benefits members build up to reflect the anticipated improved funding position and investment outlook of the scheme, subject to the outcome of the 2023 valuation. This would, in effect, see a reintroduction of the benefit structure that existed prior to April 2022 for service from 1 April 2024.

List of proposals

You can find out more about the potential impact of the proposals on your benefits by using the modeller.

The salary threshold would increase to a range within £66,400 to £73,040

The salary threshold sets a maximum level on the amount of salary which is used to calculate benefits in the defined benefit part of the scheme, the USS Retirement Income Builder. The current salary threshold is £41,004. The proposal is to increase the salary threshold to within the range of £66,400 to £73,040 (the level of the threshold will be known after the September CPI data is published in mid-October 2023) from 1 April 2024 onwards.

This means you would build up benefits in the USS Retirement Income Builder based on your salary up to that new threshold from 1 April 2024. This change would mean members earning above the current salary threshold would start building up more defined benefits in the USS Retirement Income Builder from 1 April 2024 and less in USS Investment Builder, the defined contribution part of the scheme.

The salary threshold would continue to be increased annually in line with inflation, subject to a cap. It is proposed that the cap would be changed from 2.5% (to be applied from 1 April 2026 to benefits built up from 1 April 2022) to a maximum of 10% with the increases applying as follows:

• Where inflation (currently CPI) is 5% or less, the increase would be matched.
• Where CPI is more than 5% but less than 15%, the increase would be 5% plus half of the percentage increase over 5%.
• Where CPI is 15% or more, the increase applied would be 10%.

A higher accrual rate for your DB pension

The rate at which you build benefits in the defined benefit part of the scheme, the USS Retirement Income Builder, would increase.

Currently members get 1/85 of salary (up to the salary threshold) in defined benefit pension each year and 3/85 of salary as a lump sum on retirement. It is proposed to increase this to 1/75 of salary for pension and 3/75 of salary for the lump sum respectively. This would take effect from 1 April 2024.

Higher cap for future pension increases

The future benefits that you build up in the USS Retirement Income Builder would increase every year both before and after you retire in line with inflation but subject to a higher maximum increase of 10% rather than the current maximum of 2.5% (to be applied from 1 April 2026 to benefits built up from 1 April 2022), with the increases applying as follows:

• Where inflation (currently CPI) is 5% or less, the increase would be matched.
• Where CPI is more than 5% but less than 15%, the increase would be 5% plus half of the percentage increase over 5%.
• Where CPI is 15% or more, the increase applied would be 10%.

Information about your contributions, other key benefits and retirement age

Contributions to the defined benefit part of the scheme – the USS Retirement Income Builder

Whilst not subject to statutory consultation, any reduction required to overall contributions required by the trustee will be considered by the JNC.

It’s anticipated that the contributions required to fund the JNC’s proposed benefit changes will be lower than those being paid today and would see both members and employers paying less than the 9.8% and 21.6% respectively that is currently contributed.

The contribution rate required will be determined by the trustee, once the Technical Provisions consultation with UUK has completed. Then, the JNC will decide how the required reduction to overall contributions is split between members and employers. If the JNC does not reach a decision on how contributions are split, the default cost-sharing rule will be applied. This would see the reduction in contributions split between members and employers respectively on a 35:65 basis.

Contributions above the salary threshold to the defined contribution part of the scheme – the USS Investment Builder

Currently, 20% of your salary above the salary threshold (8% from your contribution above the salary threshold and 12% from your employer) is paid in to the defined contribution part of the scheme, your USS Investment Builder.

Whilst it is proposed that the overall 20% of salary above the salary threshold to the USS Investment Builder remains unchanged, the JNC will confirm, later in the year, whether the proposed share of member and employer contributions within that 20% will change.

The USS Investment Builder will continue to be available for members who want to make additional contributions or transfer savings into USS, whether or not they earn above the salary threshold.

Other key benefits

Members' death in service benefits would continue to be calculated using the same principles as at present, which may include a lump sum of at least three times salary and spouse/civil partner/dependants' pensions.

Ill health retirement benefits would also continue to be calculated on the same basis as at present (although please note their calculation is based upon the benefits payable at the date of retirement), which could provide a lump sum and pension where a member becomes ill and has to give up work.

Retirement age

No changes are being proposed to the scheme's normal retirement age which is currently age 66. (This is aligned to State Pension age, so will increase in the future as the State Pension age increases).

Where to find out more

You can find out more about USS benefits by going to uss.co.uk and selecting "For members".

All USS benefits already built up by members are secure and protected by law and the scheme rules.