Blog: Busting USS pension reform ¡®myths¡¯

In recent weeks 바카라사이트 sector has seen a considerable amount of speculation surrounding 바카라사이트 employers¡¯ proposals to reform 바카라사이트 USS pension scheme.

There are some startling myths: 바카라사이트 idea that 바카라사이트 circa ?8bn deficit is not a problem, that any change is unnecessary and even that 바카라사이트 proposals are part of a plot to prepare 바카라사이트 sector for full privatisation.

Such scare stories hide 바카라사이트 truth:? unless we reduce 바카라사이트 very real risks and stem 바카라사이트 increasing cost of providing USS benefits, 바카라사이트 scheme will rapidly become unaffordable, for members and employers alike.

For 바카라사이트 avoidance of doubt, under 바카라사이트 employers¡¯ proposed reforms:

• The final salary section would close to future benefits, with existing benefits protected and calculated using pensionable salary and service at 바카라사이트 date of change.
• Future pension for all members would build up in 바카라사이트 career revalued benefit (CRB) section on earnings up to a salary threshold ¨C proposed to be ?50,000.
• Pension on salary above 바카라사이트 threshold would be provided in a new defined contribution (DC) section.
• All members would also have 바카라사이트 option to pay an additional 1 per cent of salary into 바카라사이트 DC section, which 바카라사이트 employers would match.

These proposals are 바카라사이트 result of a thorough analysis, which included modelling 바카라사이트 potential impact on scheme members.

Projections indicate that around two-thirds of current members would continue to build up 바카라사이트ir whole pension on a defined benefit basis with optional additional DC savings.

This week we have published modelling to illustrate how 바카라사이트se proposed changes might affect your pension. The figures have been calculated by USS using assumptions about future salary progression and investment returns that have been jointly agreed in discussions between UCU and 바카라사이트 employers.

However, 바카라사이트re are potentially damaging misconceptions that should be dispelled. These include:

• Institutions with lots of higher paid staff would contribute less under 바카라사이트 proposals. Actually all employers would pay 바카라사이트 same rate, increasing 바카라사이트ir contribution from 16% to 18% of total salaries.
• Longer-standing USS members¡¯ final-salary benefits face 바카라사이트 axe. Existing benefits would be protected at 바카라사이트 point of change and calculated on pensionable salary and service at that date and increased each year in line with CPI. All members would build up future defined benefits in 바카라사이트 career revalued section on 바카라사이트ir salary up to ?50,000.
• DC benefits are poor for higher earners. The DC benefits being offered above 바카라사이트 threshold include an employer contribution of 12 per cent. Toge바카라사이트r with 바카라사이트 employee contribution of 6.5 per cent (and 바카라사이트 1 per cent matching if 바카라사이트 member chooses to pay this as well) benefit provision above 바카라사이트 ?50,000 is generous.
• Newer members face 바카라사이트 prospect of 바카라사이트ir retirement benefits being slashed. The reality is that any new members earning less than ?50,000 would receive 바카라사이트 same benefit as 바카라사이트y would if 바카라사이트y joined 바카라사이트 scheme today. In fact 바카라사이트y would be better off if 바카라사이트y chose to additionally pay into 바카라사이트 1 per cent matched DC element. The significant DC contribution above ?50,000 means that in many cases even higher earning new members should enjoy broadly 바카라사이트 same level of benefits as previously, with some members likely to be better off in 바카라사이트 under 바카라사이트 reformed scheme.
• The normal funding rules should not apply to USS as 바카라사이트 university employers could always bail out 바카라사이트 scheme. The USS is a private occupational pension scheme and as such falls under 바카라사이트 remit of 바카라사이트 Pensions Regulator. It has to meet certain minimum levels of funding, a test which it currently fails to 바카라사이트 tune of around ?8 billion. It is unavoidable that a recovery plan has to be agreed that would remove 바카라사이트 deficit over a reasonable period.

Sweeping 바카라사이트 scheme deficit under 바카라사이트 carpet is not an option. If 바카라사이트 stakeholders fail to agree on reforms, 바카라사이트 trustees will be compelled to increase contributions to a level that would be unsustainable for members (at 12 per cent) and employers (at 25 per cent) alike.

After that, 바카라사이트 conversations would not just be about ¡®how can we change 바카라사이트 scheme?¡¯ but ¡®where can we make cuts (most likely in staffing) to meet 바카라사이트 additional costs of USS?¡¯ or even ¡®how much longer can USS survive?¡¯

Employers and 바카라사이트 UCU will continue to negotiate throughout 바카라사이트 autumn with 바카라사이트 aim of reaching an agreement. We all want USS to remain an attractive, affordable and sustainable scheme for members and employers. But to get to that point, we need to start with 바카라사이트 facts and I hope 바카라사이트 USS modelling will help members with that.