What is allocation?
Allocation is giving up part of your entitlement to the pension payable to you on retirement to provide an
annuity to be paid on your death to one or more beneficiaries.
This factsheet is applicable to active members, former members and pensioners who retired before 6 April
2006.
Commonly asked questions
Introduction
The arrangements outlined in this factsheet offer certain members, former members and pensioners of Universities
Superannuation Scheme (USS) the opportunity to allocate a part of their pension from the main section of USS to a
named beneficiary. It may be of interest to you if you are looking for a means of providing some form of extra income
for one or more members of your family or other individuals after your death.
You cannot allocate any funds built up under the USS Investment Builder.
The factsheet explains:
• When you are eligible to make an allocation and the options open to you;
• How to apply to make an allocation and how your application will be processed; and
• How the cost and benefits are worked out.
It represents the interpretation of the current scheme rules and actuarial advice received by the trustee. These may
change from time to time.
The trustee is defined in the scheme rules and is Universities Superannuation Scheme Ltd, the body responsible for
administering the scheme.
Should you have any queries about points in this factsheet, its authoritative source is the trust deed and rules
and amending deeds for USS. These documents will take priority over any statement in this factsheet should any
difference of interpretation arise. Your employer can show you copies of these documents or you can view/download
the current rules from the USS website www.uss.co.uk
What is an allocation?
Allocation is giving up part of your entitlement to the pension payable to you on retirement to provide an annuity to be paid on
your death to one or more beneficiaries.
Beneficiary is defined in the scheme rules and means:
• Your spouse or civil partner; or
• Any person nominated by you who at the time of nomination is, in the opinion of the trustee, your
dependant.
For example you may wish to nominate your partner if you are not married because either your partner
is financially dependent on you or you and your partner are financially interdependent (e.g. where
your partner needs a second income to maintain a standard of living which had depended on your joint
income); or
• A child eligible for a child’s pension and who is mentally or physically incapable of supporting themselves.
USS Allocation factsheet May 2017 v2
Page 1 of 6
You may, if you wish, and subject to the approval of the trustee and HM Revenue & Customs, make an allocation for a
limited period ending at a specified point in time.
You may make more than one application for an allocation in favour of either:
• The same beneficiary; or
• Different beneficiaries.
Additional allocations will not affect allocations already made. The total amount allocated must not exceed the limits
set out in the section ‘How much of my pension may I allocate?’
Types of allocation
There are two types of allocation and you must choose which type you want.
Cancellable
If the beneficiary dies before you do, the allocation will be cancelled and your pension restored to the full
amount; or
Non-cancellable
If the beneficiary dies before you do, the reduction in your pension is permanent.
You must state on the application form which type of allocation you wish to make. A cancellable allocation will
provide a smaller annuity for the beneficiary than a non-cancellable allocation.
Am I eligible to make an allocation?
You are eligible to make an application for an allocation if you are:
• A member over age 55 who is in service and with five or more years’ pensionable service; or
• A USS pensioner that retired before 6 April 2006 who has married, after retirement, less than six months
ago; or
• A pensioner that retired before 6 April 2006 whose marriage is dissolved or annulled, or in respect of
whom a decree of judicial separation is made after the pension has come into payment; or
• A member over age 55 with entitlement to deferred benefits; or
• an ex-spouse participant (member’s former spouse/civil partner granted a pension credit following a pension sharing order) over age 55 whose pension credit has not come into payment.
However, you are not eligible if:
• You retired after 5 April 2006; or
• You are about to retire on the grounds of incapacity or infirmity, although any allocation already approved
prior to such ill-health or infirmity will stand; or
• Your membership of USS is suspended (for example, if you are on leave of absence with no contributions
being paid); or
• You are absent from work owing to sickness.
How much of my pension can I allocate?
You may allocate as much of your pension as you like provided that the pension remaining payable to you is greater
than or equal to the higher of:
• The total of all allocated annuities for beneficiaries; and
• The Guaranteed Minimum Pension required under the Social Security Pensions Act 1975.
USS Allocation factsheet May 2017 v2
Page 2 of 6
Additionally, you cannot allocate any pension:
• Attributable to additional pension received following payment by your employer at retirement to purchase
additional USS service; or
• Any additional pension received following conversion of your tax-free lump sum entitlement to pension; or
• Any part of an ex-spouse’s/civil partner’s pension (pension credit) that could be converted into a tax-free
cash payment.
You will be advised if the amount of the allocation you apply to make exceeds the maximum permitted by HM
Revenue & Customs.
Within these limits, the actual amounts allocated will depend upon what you consider to be a suitable income for the
proposed beneficiaries, whilst at the same time being financially practicable as far as you are concerned.
An annuity provided through allocation affects only the amount of your pension, it does not reduce the lump sum
payable to you at retirement, or to your beneficiaries on your death, or the pensions payable to your spouse/civil
partner or dependent children on your death.
How much will my beneficiary receive?
This will depend upon:
• The amount of your pension which you allocate;
• The age and gender of you and your beneficiary; and
• Whether the allocation is to be cancellable or non-cancellable.
The following table gives an indication of the amounts of an additional annuity obtained by a beneficiary, for example
a spouse or civil partner, as a result of a member in service allocating £10 of pension per month. Please note these
rates are for illustrative purposes only and are only to be used as a guide. The factors will change on a case by case
basis depending on a number of factors including age, date of retirement, date of allocation etc.
Member's age at
allocation
Male member - wife two years younger
Female member - husband five years older
Cancellable £
Non-cancellable £
Cancellable £
Non-cancellable £
55
35.38
40.34
69.79
98.60
60
38.55
43.71
79.11
109.89
62
40.27
45.48
84.66
116.80
65
43.17
48.35
95.34
129.62
Remember, with a cancellable allocation, your pension reverts to the full amount if your spouse or civil partner dies
before you. With a non-cancellable allocation, your pension remains at a reduced rate if your spouse or civil partner
dies before you do.
Some examples follow. For all these examples, please read the paragraph on pension increases, as well as the notes
below.
The amount of pension you allocate and the amount of additional annuity to be received by a beneficiary are quoted
as at the date when the allocation is made, and the examples are prepared on this basis.
If you make an allocation whilst in service or whilst entitled to deferred benefits, the actual reduction to the first
instalment of your pension at retirement will be the original amount of the allocation plus pension increases
between the date of the allocation and the date of retirement. Thereafter, the reduction in your pension will be
increased annually in line with further pension increases.
USS Allocation factsheet May 2017 v2
Page 3 of 6
Examples
It should be noted that in the following examples the payments of the allocated annuity will be at the original
amount of the annuity plus pension increases between the date of the allocation and the date when the first
payment is made. Thereafter, the amount of the allocated annuity will be increased annually in line with further
pension increases.
1.
Allocation to your spouse/civil partner whilst you are in service
From the table you will see that if you are a 62 year-old male member wishing to allocate £50 per month of
your prospective pension to your wife/civil partner who is two years younger than you are, then the amount
of additional annuity is £201.35 per month on a cancellable basis (or £227.40 per month on a non-cancellable
basis).
Having made an allocation on this basis, what would happen in the following circumstances is:
a. If you die in service and your wife/civil partner survives you, he/she will receive a monthly annuity of
£201.35 (or £227.40 as appropriate), in addition to any lump sum and widow’s pension which may be
payable.
b. If your wife/civil partner dies whilst you remain in service, and you had chosen a cancellable allocation
then there will be no reduction in your eventual retirement pension. If you had chosen a non-cancellable
allocation then your eventual retirement pension will be reduced by £50 per month.
c. If you die after retirement and your wife/civil partner survives you, your retirement pension will have
been reduced from the outset by £50 per month. Your widow/former civil partner will receive, in addition
to any lump sum and pension, a monthly annuity from the date of your death of £201.35 (or £227.40 as
appropriate).
d. If your wife/civil partner dies before you but after your retirement, your pension will have been reduced
from the outset by £50 per month. If you had chosen a cancellable allocation, then your pension will be
restored to the amount, that would have been payable to you had you not made the allocation. If you
had chosen a non-cancellable allocation, then your pension will continue at the reduced rate.
2.
Allocation to a dependent former husband/civil partner
Suppose you are a 60 year-old female member and you make an allocation of £50 per month in favour of
your former husband/civil partner who is five years older than yourself and financially dependent upon you.
Your former husband/civil partner will receive on your death an annuity of £395.55 per month if the allocation was on a cancellable basis (or £549.45 on a non-cancellable basis).
If your former husband/civil partner were to die whilst you remained in service and you had chosen a cancellable allocation, then there will be no reduction in your eventual retirement pension. If you had chosen a
non-cancellable allocation then your eventual retirement pension will be reduced by
£50 per month.
3.
Allocation to a child (who is mentally or physically incapable of supporting itself)
Suppose you are a male member aged 55 and make an allocation of £50 per month for your dependent son
(aged 14) to provide him with an annuity from the date of your death until he reaches age 21, when he is
expected to complete his university education.
If you die before your son reaches age 21, then your son will receive an annuity until his 21st birthday of
£201.70 per month. This annuity will be additional to any dependent child’s annuity which may be payable
under the scheme rules. This would be a non-cancellable allocation, deducted from your pension at retirement.
Apart from the amount of allocation the situation is identical in all other respects for male and female
members.
USS Allocation factsheet May 2017 v2
Page 4 of 6
Pension increases
All pensions being paid from the main section of USS, including those for spouses/civil partners and children, are
increased periodically in the same way as the pensions in public sector schemes, called official pensions. The increase
takes effect in the April pension instalment. Amounts of pension allocated by a member and amounts of allocated
annuity received by a beneficiary are increased similarly.
For service before 1 October 2011, USS fully matches increases to official pensions. For service after 30 September
2011, USS matches increases up to 5%. If increases are more than 5%, USS matches 50% of the difference, up to a
limit of 10%. Therefore, if official pensions increase by 15% or more the USS increase will be limited to 10% in that
year.
Tax payable on allocated annuities
The total amount of an allocated annuity will be assessed for income tax purposes and will be treated as earned
income in the same way as other pension and annuity payments.
What happens if…
…you wish to terminate an allocation?
If a beneficiary ceases to need an annuity, or you no longer wish to make an allocation in his or her favour, you may
apply to the trustee to terminate the allocation. For example, if you divorce and the previously allocated annuity is
not included in the divorce settlement you may apply to the trustee to terminate the allocation made to your former
spouse/civil partner.
Notes:
• If termination is approved an actuarial adjustment will be made to your future benefits to cover the risk already
incurred.
• Representations made to the trustee by or on behalf of a beneficiary will be taken into account when
considering a request for termination.
…you change your mind before your application has been accepted by the trustee?
Any application to make an allocation may be withdrawn in writing before the trustee has accepted it.
…the proposed beneficiary dies before you do?
If the allocation was chosen on a cancellable basis then your pension will revert to its full amount. Otherwise there
will be no change in your prospective pension.
Can the trustee terminate an allocation?
The trustee will terminate an allocation if:
• You leave employment at a USS institution or withdraw from USS whilst remaining in employment at that
institution (see note below).
• You die, or retire on the grounds of ill-health or infirmity, within 12 months of the trustee receiving your
application, and the trustee is satisfied that the medical evidence supplied at the time of application was
misleading.
If an allocation is terminated, no additional annuity becomes payable to a beneficiary.
Note: If you are entitled to deferred benefits you may then apply to make a further allocation. If you apply within six
months of leaving or withdrawing it is not necessary to complete the medical certificate.
USS Allocation factsheet May 2017 v2
Page 5 of 6
Applying to make an allocation
To apply to make an allocation you must…
• Complete an application form;
• Arrange for your medical adviser to provide the certificate showing that you are in good health
• Satisfy the trustee that any proposed beneficiary other than your current spouse/civil partner is
dependent on you; and
• Send the completed application form to the trustee, through your Pensions Office if you are still employed by
a USS institution, or directly to USS if you are no longer in service.
Application form
An application form is included at the end of this factsheet.
For help estimating the benefits which will become payable to you on retirement please visit the USS website www.
uss.co.uk and access the benefit modeller. Alternatively ask the pensions contact at your employer who will arrange
for you to be provided with an estimate of the amount of your pension that you may allocate. If you are a deferred
member you should contact USS directly.
Medical evidence
A certificate from your medical adviser stating that you are in good health for your age must be provided at your own
expense. A suitable certificate is included with this factsheet. You should ask your doctor to complete this certificate
and he/she should return it directly to the trustee at the address on the certificate.
If the trustee refuses your application on medical grounds, you may ask that a medical report be obtained from
a medical adviser selected by the trustee. You must bear the cost of the report and of any examination. Your
application will then be reconsidered and you will be advised in writing of the trustee’s acceptance or rejection of
your application, and any conditions attached to acceptance.
It is not necessary to provide medical evidence of the state of health of any proposed beneficiary. However, it is
advisable that you satisfy yourself as to the state of health of anyone you propose to name as a beneficiary before
committing yourself to an allocation.
Summary
This factsheet aims to set out the details of the allocation arrangements in a straightforward and readily understandable
manner. The essentially personal aspects of a decision to offer long-term support to a beneficiary will require careful
consideration on your part. You should consider the age and special requirements of your proposed beneficiaries as well as
your own financial circumstances at retirement.
Once you have decided that you wish to make an allocation it is important to remember the necessary strict time limits
imposed for the smooth administration of the scheme. You may need to act promptly to complete your application
successfully.
This publication is for general guidance only. It is not a legal document and does not explain all situations or eventualities. USS is governed by a
trust deed and rules and if there is any diff erence between this publication and the trust deed and rules the later prevail. Members are advised to
check with their employer contact for latest information regarding the scheme, and any changes that may have occurred to its rules and benefits.
USS Allocation factsheet May 2017 v2
Page 6 of 6