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Universities Superannuation Scheme (USS) Valuation 2017
What is the USS?
The Universities Superannuation Scheme (USS) is the University's pension scheme for staff who are on academic and academic-related scales of pay (Grade 6 and over). It is the principal pension scheme for universities and other higher education institutions in the UK. Oxford University is one of around 360 employers who use this scheme.
What is the remit of the USS Valuation?
Every three years, USS carries out a valuation to analyse the scheme’s funding positon. This legal requirement enables the trustee, Universities UK (representing all employers in the scheme) and University and College Union representatives the opportunity to consider whether the findings indicate that adjustments need to be made to future contribution rates or the scheme’s future benefits – or to both.
What stage are we at with the 2017 Valuation?
The USS Trustees issued a technical discussion document on the methodology and key inputs for the 2017 Valuation in February 2017 seeking views from employers, via Universities UK, on the assumptions used.
Following this, the University of Oxford’s USS review working group (members are listed below) considered the discussion document and submitted its response in March 2017. In reaching its views, the review working party sought specialist advice from independent actuaries. The response is available from the right-hand column of this page (Related Documents).
On 1 September 2017 the USS Trustees issued a formal consultation on the technical provisions of the Scheme to Universities UK (see https://www.uss.co.uk/how-uss-is-run/valuation/2017-valuation-updates/consultation-with-universities-uk-commences)
The University’s USS review working group considered the consultation and submitted its views on the consultation via a survey from Universities UK. This enabled Universities UK to collate the views from the employers participating in USS about the funding and benefits in USS given the funding challenges facing the scheme at this valuation. The University’s response is available from the right-hand column of this page (Related Documents).
USS have provided details on how decisions are made on future pension benefits. See https://www.uss.co.uk/how-uss-is-run/views-from-uss/how-decisions-are-made-on-future-pensions-for-uss
Further information on the valuation and the timetable can be found on the USS website https://www.uss.co.uk/how-uss-is-run/valuation
Membership of the University of Oxford USS review working group
USS Review Working Group currently consists of the following membership:
- Professor Richard Hobbs (chair) – Member of Council (Medical Sciences Division)
- Charles Alexander – Finance Bursar, Merton College
- Sir David Norgrove - external member of Council
- Professor Jane Humphries (Humanities)
- Professor Gordon Clark – (Social Sciences)
- Professor Sam Howison (MPLS)
- Giles Kerr – Director of Finance
- Julian Duxfield – Director of Human Resources
- Professor Fabian Essler (MPLS)
- Sir Andrew Dilnot, Warden of Nuffield
- Professor Danny Dorling (Social Sciences)
- Professor Cecile Fabre, Junior Proctor (Humanities)
- A further member is to be identified from the membership of the Oxford Research Staff Society
Any new proposals will be subject to consultation for a period of at least 60 days. More details will be provided when available.
The guide to the formal review of USS’s funding position in 2017 provides more information, including videos explaining the valuation process in more detail.
Update 1 May 2018
UCU and UUK have now agreed the terms of reference of the Joint Expert Panel.
The agreed purpose of the Panel is to:
• make an assessment of the 2017 valuation of the USS fund
• focus in particular on reviewing the basis of the scheme valuation, assumptions and associated tests
• agree key principles to underpin the future joint approach of UUK and UCU to the valuation of the USS fund
The Panel will take into account:
• the unique nature of the higher education sector, intergenerational fairness and equality considerations
• the clear wish of staff to have a guaranteed pension comparable with current provision whilst meeting the affordability challenges for all parties
• the current pensions regulatory framework
UCU and UUK will each appoint three panel members, with an independent chairman to be jointly agreed. The Panel will aim to submit a report to UUK and UCU in September 2018, relating to the 2017 valuation. The current pension benefit structure will remain in place unchanged until at least 31 March 2019, so the panel will need to conclude its work in time to put in place a sustainable way forward for USS. The Panel will also provide a follow up report relating to future valuations.
UCU has published the full terms of reference for the Panel on its website here. UUK has now published a new Q&A document for USS members. This covers the latest developments with USS, the Joint Expert Panel, the valuation timetable and a number of recent issues that have been raised by members.
27 April Joint Negotiating Committee meeting
The JNC resolved to revoke its 23 January resolution on benefit reform. The USS Trustee had requested that the JNC make its position known by 30 April.
The USS trustee has indicated that they are minded to take forward Rule 76.4-8. This allows for the imposition of increased costs on employers and scheme members and the trustee has indicated they will work towards implementing this from 1 April 2019. This would enable the trustee to be in a position to demonstrate compliance with its statutory responsibilities and accountabilities to the Pensions Regulator. UUK is seeking urgently clarification on the Rule 76.4-8 process before it commences.
Update 16 April 2018
Email to all University and College staff from the Vice-Chancellor, Professor Louise Richardson:
You will by now have received the welcome news that the members of the University and College Union have voted in favour of the most recent ACAS facilitated proposal, namely the creation of a Joint Expert Panel to agree key principles to underpin the future joint approach to the valuation of the USS fund. In so doing, they have given the UCU leadership a mandate to suspend industrial action with immediate effect.
This is very welcome news to our whole community, but especially to our students, who can return for Trinity term confident that their studies will not be disrupted in this critical exam period. The suspension of industrial action also gives us an opportunity to come together as a community to address what remains a really difficult challenge.
The first step in this process will take place on 24 April when Congregation will convene to discuss the pensions issue. Any and all views will be welcome, as will creative ideas on how we might realize the commitment Council has made to seek pension provision for USS members employed by the University that is of the same standard as currently available. The details of the meeting will be in Thursday’s (19 April) Gazette. If you are a member of Congregation and would like to speak, please let the Secretariat know in advance by emailing firstname.lastname@example.org .
A number of practical questions about the composition and remit of the Joint Expert Panel remain to be agreed between UUK and UCU before the terms of reference and timescales can be published. Given the statutory responsibilities of the USS Trustee and the Pensions Regulator their support for the process must also be secured. I very much hope that in reviewing the assumptions in the current valuation, this panel will increase the transparency of the process and build confidence in the result.
We will continue to provide regular updates on local and national developments.
Update 13 April 2018
Statement from the University and College Union: The USS consultation closed at 2pm today. The result was as follows:
Total balloted: 53,415
Total votes cast: 33,973
Total number valid votes: 33,913
Yes to accept the UUK offer 21,683 (64%)
No to reject the UUK offer 12,230 (36%)
In line with the decision of members the union will suspend its immediate industrial action plans but keep our legal strike mandate live until the agreement between UCU and UUK is noted by USS.
Response from Universities UK on behalf of employers including Oxford University:
'The decision by UCU members to support the creation of a Joint Expert Panel means that strike action is immediately suspended. This gives students important reassurance that they won’t be affected by further disruption during their summer study and exam period.
'Reviewing the methodology and assumptions in the current valuation will build confidence, trust and increase transparency in the valuation process. It will provide an opportunity to consider the questions raised about the valuation by scheme members and employers. It is important that interested parties engage with the panel and remain open-minded about its possible findings.
'Working in partnership with UCU, we will now appoint a jointly agreed chair for the panel as soon as possible before developing its terms of reference, order of work and timescales.
'Alongside UCU, we will seek support for this process from USS and the Pensions Regulator, fully recognising their statutory responsibilities and accountabilities. Current pension benefits are guaranteed until 1 April 2019, so the panel will need to conclude its work in time to put in place a sustainable way forward for USS from that date.'
Update 4 April 2018
Message from Council shared with all staff by the Vice-Chancellor:
'Council notes the ongoing negotiations between UCU and UUK and will make every reasonable effort to resolve the current dispute within the national framework of USS. Although the outcome of the current negotiations remains unclear, Council will seek to provide pension provision for USS members employed by the University that is of the same standard as currently available, subject to the duties of the Council, as a trustee body, to serve the interests of the University as a whole. Council resolves to treat achieving this objective as an issue of high priority for the University. It will ensure that all members of Council are fully involved in Council’s deliberations on pension provision, and that they will regularly review the delivery of the above objective and report to Congregation in a timely and transparent manner.'
Update 23 March 2018
UUK has issued a statement on risk in response to concerns about the underlying assumptions of the valuation with the aim of restoring public confidence (Related Documents). UUK has undertaken to convene an independent expert group.
USS has published some new information on the 2017 valuation, addressing myths and misconceptions that have taken hold.
Update 16 March 2018
Latest Briefing Sent from UUK to Vice-Chancellors and Principals at USS employers
There is strong support amongst employers for the reform proposal jointly developed at ACAS. UUK is currently mapping out a range of options and considering how best to proceed. UUK must ensure that the employer position taken forward reflects the latest position for the majority of employers. Although the ACAS proposal would mean higher contributions for employers (at 19.3% of salaries) and for employees (at 8.7% of salaries), it offers a viable alternative to maintain defined benefit pensions for this valuation.
UUK continues to seek a resolution to this dispute to avoid further strike action and more disruption to students' education. UUK is contacting UCU to better understand the reaction from their branch Presidents to the ACAS proposal. Clearly we all want to see an end to the current disruptive industrial action, however it must also be recognised that it is not clear at the moment what would be acceptable for UCU in terms of trying to reach a negotiated settlement to this dispute.
In addition, the Pensions Regulator today signalled to UUK that it is reviewing the ACAS proposal and is likely to provide a view next week. They highlighted their concern about ‘any further dilution’ of the ACAS proposal and the risk that would entail for the scheme.
As well as talking further with UCU, in the coming days we are seeking to hold an Employers Pensions Forum meeting and an extraordinary UUK Board meeting to review the employer position.
UUK is making arrangements to establish the independent expert group on valuation as soon as possible. This will have an independent chair, involve academics and pension professionals, and liaise with both USS and the Pensions Regulator. The group will consider issues of methodology, assumptions and monitoring, aiming to promote greater transparency and understanding, and will take account of the real strengths, sustainability and viability of the scheme.
Removing the indexation cap from the proposal developed at ACAS
We have received correspondence today suggesting amending the proposal to include the scheme’s current levels of indexation and thought it would be helpful to share information about the costs involved. This change would require a further increase of c2.5% in contributions beyond those increases included in the ACAS proposal, split 65%/35% between employers and scheme members. This would take employer contributions to c21% of salaries. This change would also increase the risk in the scheme which could potentially be a concern for the Pensions Regulator.
- The future of university pensions is a matter of law. The Pensions Regulator has a responsibility to ensure the security of pensions, for the sake of all members. Employers must act in the interests of current and future members, to ensure existing pensions are secure and future pensions sustainable and attractive.
- The challenges facing USS are not unique and are challenges that have been faced by many other defined benefit (DB) schemes.
- Talks between Universities UK and UCU began in January 2017 and since then employers have put forward two proposals that secure the sustainability of members' pensions. Neither proposal was deemed acceptable by UCU.
- Employers have listened to the concerns that UCU set out on behalf of their members and compromised. Employers have proposed to increase contributions to the scheme to maintain meaningful defined benefits. The proposal jointly developed with UCU negotiators at ACAS would ensure that more than 50% of USS members retain full DB benefits.
- Given the concerns about how the scheme has been valued, we will establish an independent, expert group to examine the valuation assumptions which will report back as soon as possible.
- Faced with the prospect of employers and member representatives failing to agree necessary reforms, then the USS Trustee Board would have no option but to raise contribution requirements in line with the costs of current benefit accrual, without undue delay. This would mean that USS triggers automatic increases in salary contributions of c11%, split 65%/35% between employers and staff.
- All universities want an urgent, affordable solution to end this dispute which is having a damaging impact on students and staff.
Update 16 March 2018
The provisional agreement reached at ACAS on revised benefit proposals was not agreed by UCU’s Higher Education Committee (HEC) and consequently was not put to a Joint Negotiating Committee (JNC) meeting. As a result the decision of the JNC in January still stands, but the planned employer consultation on these proposals remains on hold until we receive further notice. The consultation will therefore not commence in the week beginning 19 March 2018.
Update 13 March 2018
Following more than a week of intensive ACAS talks between UUK and UCU, negotiators have agreed the terms of a new joint proposal to address the latest USS valuation. The agreed text of the full proposal is available from the right-hand column of this page (Related Documents). The agreement includes a solution to the current valuation and recognises the work needed to put the scheme on a sustainable footing for the future.
The proposal sets out a process whereby UCU would suspend industrial action from and including Wednesday 14 March. In addition, UUK has today asked USS to suspend the member consultation on the previous JNC proposal, which was due to commence on 19 March.
Update 13 March 2018
USS trustee provided an update on the valuation, highlighting six things that USS members should know about the valuation https://www.uss.co.uk/how-uss-is-run/valuation/an-urgent-update-from-the-trustee.
Update 7 March 2018
The special meeting of Council which was convened to review its position on the UUK survey of USS pension risks ended earlier this afternoon. Council has decided, in light of the meeting of Congregation yesterday, to reverse its previous response. In answer to UUK’s question “Does your institution support the level of risk being proposed by the USS trustee for this valuation?” Council’s position is now: “My institution accepts the level of risk being proposed by the Trustee”, and so its previous rejection of the level of risk proposed is changed to acceptance. This will be communicated to UUK later today. Council also withdrew its Notice Of Opposition to Resolution 5, the motion which was due to be debated at Congregation yesterday.
Council recognises that this issue should have been handled better. It has listened to and understood concerns across the University about the financial impact on staff who are members of the USS pension scheme, and it will continue to argue in favour of the best possible, sustainable pensions for all its staff. When Council meets again on Monday it will have a much fuller discussion about pensions, including ways in which it can ensure that it remains closely in touch with opinion across the collegiate University.
Update 28 February 2018
Universities UK has issued an open letter detailing its position on the dispute over pensions (see related documents). It has reported that progress had been made in talks with UCU. http://www.universitiesuk.ac.uk/news/Pages/Progress-made-at-USS-talks.aspx
Update 23 January 2018
A decision on proposed benefit reform has been reached by the USS Joint Negotiating Committee (JNC) with the JNC’s independent chair voting in favour of a revised employer proposal tabled by Universities UK (UUK). UUK’s statement on the proposed benefit reform gives details of the proposal and the background on the need for change to address the funding deficit in USS. In summary the proposal is:
Employer contributions - Employers will continue to pay a contribution of 18% of salaries towards USS, and it is proposed that this important commitment is extended from March 2020 to March 2023.
Member contributions - • Members will continue to pay 8% of salaries towards USS. A new option is being proposed which would allow members to pay less (4% is proposed), whilst still benefitting from the full employer contribution of 18%.
Main benefit change - The JNC proposal is to change USS so that members earn defined contribution (DC) benefits on all of their salary from April 2019. Currently DC benefits are only earned on salary over £55,550, with defined benefits (DB) earned on salary below the threshold.
DC and DB benefits are quite distinct, and both have their advantages. In a DC scheme, members have individual saving pots (or funds) that both they and their employer pay into. At retirement, members draw their pension savings from their fund which consists of all of the contributions paid in plus the investment returns that have been earned. They can then choose whether they wish to take out all their retirement savings as a lump sum, or to opt for alternative options such as a pension (known as an annuity) or drawdown (where cash is drawn from the fund periodically).
More information on the difference between DB and DC pension benefits can be found on Universities UK’s website.
Update 8 January 2018
As at 19 December 2017, the JNC had not reached a decision. UUK and UCU representatives have agreed formally to reconvene on 23 January 2018.
The USS trustee board has considered the implications of this. As explained in the USS valuation update available at https://www.uss.co.uk/how-uss-is-run/valuation/2017-valuation-updates/update-on-the-2017-valuation-funding-review the trustee board has taken steps to ensure that the valuation is completed by deadline of 30 June 2017 and triggered the default cost sharing arrangement to support the current benefits.
Update 17 November 2017
Following the responses from employers to the Universities UK (UUK) survey, UUK has put forward initial proposals to reform benefits to the Joint Negotiating Committee (JNC) of USS.
A Q&A document on the proposals is available, as is the current timetable for the next steps, from the right-hand column of this page (Related Documents).