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UPDATED: Information about the current status of the valuation and next steps

This article was updated on 4 June 2019 to include a link to the University's response to UUK concerning options for the 2018 valuation.

This is an update about the Universities Superannuation Scheme (USS). It was sent directly to USS members at the University on Friday 31 May via the USS e-bulletin. If you did not receive this e-bulletin and think you should have done, you might want to check your spam folder. You can sign up for the bulletin online (Raven login required).


The 2018 valuation of the Universities Superannuation Scheme (USS) was launched immediately after the completion of the disputed 2017 valuation. By taking account of changes in market data, life expectancy, and forecasted investment returns since the last valuation, as well as actual investment experience in the year after March 2017, the 2018 valuation produced a more positive picture of the scheme’s funding position than the 2017 valuation. This does not require contribution increases of the level needed under the cost-sharing arrangements that were introduced to complete the 2017 valuation, but still requires some increase in contributions.

Various options for these contribution increases are currently being considered by USS in consultation with Universities UK (UUK; representing employers) and the University and College Union (UCU; representing scheme members), who both sit on the USS Joint Negotiating Committee (JNC). The Pensions Regulator also needs to agree to any revision of benefits and/or contributions.

Recent developments

USS consulted employers (through UUK) on the methodology and assumptions to be used for the 2018 valuation, and employers submitted their views in March 2019. You can read the University’s response online.

In line with most employers, the University supported proposals made by UUK for a total contribution rate of 29.2%, with 9.1% to be paid by members and 20.1% by employers. This proposal required ‘contingent contributions’ – extra payments by both members and employers – to be made if the scheme’s deficit exceeded £10billion in the period between valuations. In the UUK proposal these would have amounted to an extra 3% in total, to be split 65:35 between employers and members, and to be phased in in steps of 1%.

The USS Trustee responded to UUK in early May with three options that it considers would enable the 2018 valuation to be completed.

Option 1 Combined contribution rate of 33.7% to apply from 1 April 2020. This is slightly lower than the rate of 35.6% that would be introduced by the final phase of cost-sharing increases.
Option 2 Combined contribution rate of 29.7% with contingent contributions of 6% in total to be triggered if the deficit exceeded £4billion. This is a modified version of the UUK proposal, with higher contingent contributions and a much lower threshold for triggering them. Option 2 would be subject to agreement by the JNC and a member consultation, which would likely delay implementation of this option to summer 2020. In this event, the higher Option 1 contribution rate of 33.7% would apply for a period from April 2020 until the Option 2 mechanism was finalised.
Option 3 Combined contribution rate of 30.7% to apply from 1 October 2019, with a new valuation to be undertaken as at 31 March 2020. If the 2020 valuation does not produce an alternative schedule of contributions, the combined contribution rate will rise to 34.7% from 1 October 2021.

UUK sought responses from employers on these three options. Along with most employers, the University has indicated that its preference would be for Option 3. Although the contribution rate of 30.7% is higher than we believe is necessary, and is likely to be a stretch for some employers and members, Option 3 presents the best opportunity to progress quickly towards the long-term solution of an alternative and more sustainable structure for USS.

The University believes that a different valuation methodology is needed to reduce the volatility of the current USS valuation process and enable better long-term planning for both members and employers. It provided some suggestions for alternative approaches to measuring scheme risk as Appendices to its March response to UUK. Cambridge would also like to see some flexibility in the contribution structure, so that employees who cannot afford the top contribution rate are still able to contribute towards a pension rather than opting out completely, as at present.

The University will submit its views on measuring risk to the Joint Expert Panel (JEP). The JEP was set up by UUK and UCU to review the 2017 valuation methodology and is now investigating the USS valuation process and scheme governance more generally, as well as the long-term sustainability of the scheme. It is expected to report on these issues later this year, which would allow its recommendations to inform the methodology of the proposed 2020 valuation.

Next steps

The timetable for implementing any contribution changes depends on how rapidly the various parties can reach agreement. The University will do everything it can to push for timely agreement, lower contribution increases, and – in the longer term – changes to the structure and valuation methodology of USS that reduce the uncertainty and volatility produced by the current valuation process.

If the JNC accepts the recommendation of Option 3 unchanged, the 2018 valuation will be completed by 30 June 2019, meaning that a 30.7% combined contribution rate would apply from 1 October 2019. This would be split 9.6% members and 21.1% employers – an increase for members of 0.8 percentage points of salary from the 8.8% they have been paying since 1 April 2019.

If the JNC proposes benefit changes or a different distribution of costs, the valuation will not be completed in time to apply the new contribution rate from 1 October 2019. In this case, the second phase of cost-sharing increases will be implemented on that date instead: a combined contribution rate of 32.9%, split 10.4% members and 22.5% employers. This would be an increase for members of 1.6 percentage points over the 8.8% they have been paying since 1 April 2019.

The final adoption of any of the options is dependent on the agreement of the Pensions Regulator, to whom the valuation must be submitted.

Open meeting for USS members 

There will be an open meeting for USS members at Cambridge on Thursday 27 June in the Babbage Lecture Theatre, New Museums Site. Anthony Odgers, University Chief Financial Officer, and Sam James, Cambridge UCU President, will give an update on the current situation and take questions from the audience. The meeting will be recorded for the benefit of those who are unable to attend in person.

To attend the meeting, please sign up online.

The University is committed to keeping USS members informed of developments relating to the scheme. Updates will be sent directly to members via the USS bulletin, published on the For Staff pages, and advertised in The Reporter.