USS For The Future:
January 2016
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Contents
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Some context
New USS sections – DB and DC
DB benefits and contributions
DC benefits and contributions
Saving more for your retirement
Pensions +
High Earners pensions tax issues
Finding out more
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Some Context
• Last valuation in
March 2014 –
deficit of £5.3bn
• In 2014/5 the
University
contributed £24m
into USS
• Large private
scheme – over
300,000 members
Contributing Factors
• Longer life
expectancy
• Pay increases
greater than
inflation
• Recession and low
interest rates
• Previous deficits
not dealt with
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New USS Sections
• Defined Benefit
(DB)
• Career Revalued
Benefits
• Pension benefits
known
• For salaries up to
£55,000
• Defined
Contribution (DC)
• Main pension
benefits depend on
investment growth
• For salaries over
£55,000
• Also for AVCs
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New USS – DB Section Benefits
• Annual pension calculated at 1/75th of
salary for every 1 year of pensionable
service
Plus:
• 3/75ths of salary as cash lump sum
• Salary is revalued each year using the
CRB method.
You can estimate your own benefits using
the USS benefits illustrator.
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New USS – DB Section Benefits
Example based on a member with exactly four years’
service
Salary in year
Pension calculation
Pension for year
Banked pension
£40,000
1/75 x £40,000
£533.33
£533.33
£42,000
1/75 x £42,000
£560.00
£1,093.33
£43,500
1/75 x £43,500
£580.00
£1,673.33
£45,000
1/75 x £45,000
£600.00
£2,273.33
Total annual
pension
£2,273.33
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New USS DB Section Benefits
Additional Benefits
Death in Service Benefits
• 3x salary life cover
• Pension benefits for spouse or
dependant children
Ill health retirement benefits
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New USS DB Section - Contributions
Illustrative Example – Pensionable Salary £40k
£3,200
£7,200
Employer (18%)
Employee (8% tax free)
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New USS DC Section Benefits
Main benefits depend on:
• Contributions paid in
• Investment performance
• Funds held in individual DC accounts
• Some individual choice on investment
funds
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New USS DC Section - Contributions
• Employee – 8% (tax free)
• Employer – 12%
Additional Contributions
• Employee – flexible
• Employer – matched up to 1%
• Calculated on total pensionable salary
• Example –salary £40k
• 1% £400, plus matched funding of £400 =
£800 invested (cost of £320 to employee)
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New USS Contributions
You
Taxman
Employer
£320
£80
£400
£800
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Get more through Pensions +
Pensions+ is our salary sacrifice
scheme for paying into USS
How it Works
• The University pays USS
contributions on your behalf
• You agree to a reduction in
your basic salary
• Overall contributions to USS
stay the same
• You and the University pay
less NI
Savings Example
Salary £40k
Rates from 1 April 2016
Standard USS member pays
£3,200
Pensions+ USS member
pays
£3,200 less NI Saving of
£384 = £2,816
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New USS and pensions tax issues
Government policy continues to reduce tax allowances
From April 2016
• Lifetime Allowance – reduces from £1.25m to £1m
• Annual Allowance – new tapered allowance £40k
(incomes up to £150k) reducing to £10k (income over
£210k)
Various mitigation options will exist, including
• Individual and fixed protection
• Carry-over of unused allowance
• USS voluntary salary cap
• USS Enhanced opt-out
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USS For The Future
More information available at
https://forthefuture.uss.co.uk/
Updates posted at:
http://www.ncl.ac.uk/hr/benefits/pe
nsions/uss-scheme.php
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