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USS Briefing for EGM, Sept 2014

USS Briefing for EGM, Sept 2014. Steve Condliffe and Ricky Tutin Joint Pensions Officers. 2008 to date. 2008 Employer contributions up from 14% to 16% 2010/2011: Benefit changes, dispute and industrial action Deficit £2.9 billion (92% funded)

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USS Briefing for EGM, Sept 2014

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  1. USS Briefing for EGM, Sept 2014 Steve Condliffe and Ricky TutinJoint Pensions Officers

  2. 2008 to date • 2008 Employer contributions up from 14% to 16% • 2010/2011: • Benefit changes, dispute and industrial action • Deficit £2.9 billion (92% funded) • Recovery plan – employer contributions continued at 16% • Final salary (FS) scheme protected for existing staff , but: • changes to inflation caps • removal of right to protected pension if redundant 55+ (stops October) • New Career-average Revalued Benefits (CRB) scheme for new entrants • Employee contributions from 6.35% to 7.5% for FS, 6.5% for CRB • Leading to a divisive two-tier pension scheme: • Same accrual as FS (1/80 : 1/65), revaluation at CPI • Inferior to TPS (1/57), revaluation at CPI + 1.6%

  3. USS valuation • Projected cost of future benefits (liabilities) compared to existing assets + expected contributions + investment return • T = Formal triennial valuations with the Pension Regulator • Note:Pensions already in payment are safe and pension benefits already earned (past accrual) are largely safe.

  4. Components in play • Deficit recovery/avoidance • Valuation assumptions • Past service deficit • Future service costs • Financial Management plan • Investment risk • Reliance of the scheme on the sector (covenant) • De-risking assumptions (stability of scheme/contributions)

  5. Proposed changes and ‘hybrid’ • Employers keep their contributions within 16%-18% • Final salary scheme is closed to new accrual from next year: • Years of service already accrued will no longer be paid at1/80 per year x £ final salary. • Instead, 1/80 per year x £ salary at time of implementation,increased annually by Consumer Price Index (CPI) • All members will be put in the current Career Average (CRB) section with an accrual rate of 1/80, revalued by CPI (capped) • Salary that counts towards the CRB pension capped at £40K • ‘High earners’ (>£40K) can make contributions above the salary cap into a new Defined Contribution section

  6. How this would work (fictitious) • 2015. Salary £30,000. 6 years FS service. Retires 2019 with 10 years service • Under FS: £40,000 *10/80 = £5,000 pa. Lump sum £15,000 • £650 pa less (~13% less) and £1,950 lump sum less.

  7. How hybrid works

  8. Contribution rate projections • Current: Employer = 16%, FS = 7.5%, CRB = 6.5% Blended: 23.4% • Ernst & Young. Employer: 16%-18% | 18%-21% | 21%-23%

  9. Negotiator guiding principles

  10. Possible timetable • 19 September, Special post-92 Conference on USS • 24 September: USS Board of Trustees meet to discuss valuation assumptions & technical provisions for consultation • Late Sept – early Oct: University Roadshows • 1-20 October: Ballot for industrial action (if necessary) • 22 October: New scheme design formally tabled at JNC • 24 October: UCU HEC • Possible ASOS in Autumn term (assessment / exams) • 13 November: JNC expected to agree scheme design • 20 November: USS Board ratify proposals • Late 2014- Early 2015: USS formal consultation • Mar 2015 – Oct 2015: Possible implementation target

  11. Proposal for ballot and action

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