In May 2018 we published an article (University Superannuation Scheme- What has happened?) regarding the proposed changes to the USS which led to strike action and subsequently the formation of the Joint Expert Panel (JEP).
In summary, to alleviate funding shortages in the USS, it was proposed to cease benefit accrual under defined benefit terms, establish a defined contribution pension scheme to provide future pension benefits and increase the level of pension contributions with some of the employer contributions directed to the current USS scheme to enhance the funding position and protect these benefits. This last point is referred to as ‘cost-sharing’.
JEP was established by the University and College Union (UCU). JEP was agreed by UCU and Universities UK (UUK) in April and then endorsed by a ballot of scheme members. JEP is made up of experts appointed by UCU and UUK from the pensions sector and universities.
JEP issued it’s ‘phase 1’ report in September 2018 which recommended:
- To review the 2017 valuation by assessing the methodology, assumptions and process underpinning the valuation.
- To look at revising the methodology to allow a valuation to be completed without cost-sharing
Integral to this was seeking actuarial advice from AON and First Actuarial.
It then proposed a ‘phase 2’ report to identify principles to underpin future valuations and consider matters based on a revised valuation.
The USS ran a cost sharing consultation which closed on 2nd November 2018. Following this, the USS recommends no changes to cost-sharing. They will now consult with the UUK and share consultation responses with scheme stakeholders through the Joint Negotiating Committee.
There will now be a revised scheme valuation as at 31st March 2018 based on updated data and analysis. The USS is to consult with the UUK on updated funding assumptions in December and January with the aim to produce the new valuation in February 2019. This will not avoid the proposed April 2019 contribution increase but there could be alternative funding in place before higher cost-sharing starts to be implemented on 1st October 2019. Further contribution increases are still planned from April 2020.
A revised scheme valuation could potentially result in lower contributions than those originally proposed.
For more information, please contact your wealth manager at NW Brown.