The Universities Superannuation Scheme has launched a consultation with Universities UK (UUK) on the trustee’s proposed funding assumptions and methodology for the scheme’s 2023 actuarial valuation and on the statement of funding principles.
UUK said it would consult the scheme’s 331 participating employers and provide a response to the trustee towards the end of September.
Indicative results, based on the trustee’s proposals, show a significant improvement in the scheme’s funding position when compared to the 2020 valuation.
Proposals include a future service contribution rate of 16.2 per cent for the current benefits, compare to 25.2 per cent in 2020.
UUK and University and College Union, both of which have equal representation on the scheme’s Joint Negotiating Committee, have asked the trustee to price benefits at pre-April 2022 levels 1, for service from 1 April 2024.
Based on the trustee’s funding assumptions for the 2023 valuation, this would require a future service contribution rate of 20.6 per cent of salaries.
Members of the scheme pay 9.8 per cent of salary, while employers contribute 21.6 per cent giving an overall contribution rate of 31.4 per cent. This includes 6.2 per cent in deficit recovery contributions on top of the 25.2 per cent future service rate.
But under the trustee’s proposals for the 2023 valuation, there would be a potential surplus of £7.4bn on the technical provisions basis, compared to 2020 when there was a £14.1bn deficit.
The trustee is proposing to use broadly the same methodology as that used for the 2020 valuation. As such, the indicative results largely reflect significant changes in the economy since the 2020 valuation was finalised in the latter half of 2021.More than 10 years of declining interest rates has reversed over the past 18 months – as policymakers have looked to tackle above-target inflation.
Dame Kate Barker, chair of the USSL Trustee Board, said: “Having wrestled with deficits and rising contribution rates for more than 12 years, UCU and UUK now find themselves in the very welcome territory of considering how to respond to very different circumstances.
“Mindful of the pace of change we’ve seen in financial conditions – it is important we do what we can to ensure the scheme is more resilient than in the past should some of the challenges experienced over the past decade emerge again in future.
"Most private DB schemes in the UK are now closed. USS is one of the relatively few still open to accrual and new members – and we very much want that to continue."“The emergence of a provisional surplus could provide a platform for greater stability in terms of the scheme’s funding position, contribution rates and benefit structure – and we look forward to supporting UCU and UUK’s discussions on this."
Universities Superannuation Scheme was established in 1974 as the principal pension scheme for universities and other higher education institutions in the UK. It has more than 500,000 members across 330 institutions and is one of the largest pension schemes in the UK, with total fund assets of £90.8bn.
The scheme's trustee is Universities Superannuation Scheme Limited, a corporate trustee which provides scheme management and trusteeship from its offices based in Liverpool and London in the UK. The trustee company delegates implementation of its investment strategy to a wholly owned investment management subsidiary company – USS Investment Management Limited – which provides in-house investment management and advisory services.
