The USS Trustee has confirmed that contribution increases under the cost-sharing rule will go ahead in April 2019. It has also given notice that it intends to conduct a new valuation of the scheme as at 31 March 2018.
The USS Trustee has recently provided an update to USS members on its response to both the Joint Expert Panel (JEP) report and the recent member consultation on cost-sharing.
A summary of this update is provided below and is being issued jointly by the University’s Pensions Working Group and Cambridge UCU. This summary was sent directly to USS members at the University on Tuesday 27 November. You can read the full statement by the USS Trustee here.
Contribution increases under cost-sharing
The Trustee has considered member feedback on the contribution increases proposed under the Scheme’s cost-sharing rules. It is not proposing any change to these increases and the first phase of increases is now expected to go ahead in April 2019.
This means that members’ pension contributions will rise to 8.8% of salary from 1 April 2019. For those members who are paying Additional Voluntary Contributions (AVCs), the 1% employer ‘match’ will also be discontinued from 1 April 2019. Other benefits will remain unchanged.
New 2018 valuation
The Trustee has agreed to undertake a new valuation of the scheme as at 31 March 2018. This will take into account changes in market data, life expectancy, forecasted investment returns since the last valuation and actual investment experience in the year after March 2017. USS will consult employers on new technical assumptions for this valuation. Over the next few months, the Trustee will consider the recommendations of the JEP and how these might be implemented at the same time as it considers the updated technical assumptions for the new valuation.
The University of Cambridge, like the majority of UUK employers, supports the recommendations of the JEP, as long as these do not entail additional commitments that would place undue constraints on the University’s operational flexibility or generate significant financial risk. At this stage it is not clear how the JEP’s recommendations might be implemented, but the Panel’s report states that there are a number of different paths that the Trustee could adopt to reduce the combined member and employer contribution rate to below 30%.
In combination with the JEP recommendations, the 2018 valuation of USS could therefore produce a sufficiently different picture of the scheme’s funding position to enable all parties to agree an alternative way forward before the next phase of cost-sharing contribution increases comes into effect in October 2019. However, this would rely, among other things, on the agreement of the Pensions Regulator, whose position on the JEP recommendations is still not known.
The Trustee is proposing to finalise contribution rates based on the new 2018 valuation in February 2019, at which point the Joint Negotiating Committee (representing scheme members through UCU and scheme employers through UUK) will have the opportunity to respond to the new proposals. The aim is for the JNC to agree a schedule of benefits and contributions to come into effect before the second wave of cost-sharing contribution increases in October 2019.
Keeping you informed
The University is committed to keeping USS members informed about matters that affect their pensions. Updates will be distributed via this bulletin, on our For Staff website and in The Reporter. Previous briefings on the disputed 2017 valuation are collected here.
At a staff open meeting in October, Anthony Odgers, University Chief Financial Officer, and Richard Farndale, UCU Cambridge pensions representative, discussed the JEP recommendations and possible ways forward for USS. You can watch a recording of that meeting here (Raven login required).