In a nutshell: USS valuation latest

USS benefit changes to go ahead from 1 April 2022

The USS Trustee has approved the changes to benefits from 1 April 2022 that the Joint Negotiating Committee (JNC) approved (by casting vote) on 22 February in order to conclude the 31 March 2020 valuation of USS, writes Rebecca Dodd, Head of Mercer’s Higher Education Group.

The changes

Confirmation of the changes was issued to heads of participating USS institutions on Tuesday 1 March 2022.

Benefits – for service from 1 April 2022

• Accrual rate reduced from 1/75ths to 1/85ths
• Salary threshold reduced from £59,883.65 to £40,000 (DC contributions stay at 20% in total above the threshold)
• Indexation capped at 2.5% p.a. from the April 2026 increase (for benefits before and after retirement)

Contributions – from 1 April 2022

• 9.8% for members (no change to current)
• 21.6% for employers (currently 21.4%) for 2 years reverting to 21.4% again from 1 April 2024 (unless other arrangements are put in place)

Covenant support measures

• Debt monitoring with metric testing
• Pari passu (metric E) means equal security for USS on new secured debt with a threshold of 10% of assets

Note: metric testing (including metric E on pari passu) excludes those with assets and income under £50m and those on “limited participation terms” like many post 92 universities

• Rule change on employer exits with a 20 year rolling moratorium Presentation to members

Response

• UCU have said the dispute is ‘far from over’ stating that ‘employers have forced through pension cuts’.
• UUK have responded to further UCU strikes over USS saying that taking university staff out on strike again will not remove the need to reform USS to ensure it remains affordable for members and employers.
• Two USS members have obtained court permission to move to the next stage of their claim against the directors of the USS Trustee for conducting a ‘flawed’ 2020 valuation. The judge ordered a future hearing on 22 March 2022 for both sides to attend to determine if the claim can proceed.  USS will now oppose permission for the claim to proceed at the hearing.

What can you do?

Here are some things you might want to consider:

• Council/Board/Exec Team guidance
• Communication and education with members
• Review of wider employee benefits
• Review of other pension arrangements at your institution

Important notes

This note has been prepared for UHR to give an overview of the changes to USS from 1 April 2022. Mercer does not accept liability or responsibility to any party in respect of this note. You should not take or fail to take any action based on this note without advice. The information provided is my interpretation of the changes based on publicly available information at 7 March 2022. If there is any difference between this note and the information available from USS, then USS is correct.

Rebecca Dodd

Head of Mercer’s Higher Education Group

rebecca.dodd@mercer.com

0113 394 7675