Consultation on the future funding of USS

1

UCL Pension Services

• Consultation on the future funding of USS

2
Overview

• Why was a review of USS benefits and
  contributions required?
• The proposals for change
• What stays the same
• The consultation period
• Implementation of changes
• Questions

3
Why is a review required?

• Increasing longevity
• Salary increases impact on pension costs
• The unpredictability of inflation (notably the
  Retail Price Index)
• Reduced investment returns and changes to
  statutory funding regime
• The next actuarial valuation of USS is on 31
  March 2011

4
Proposals

• A normal pension age of 65 will be introduced for
  new entrants and for the future service of
  existing members.
• Existing members over the age of 55 will be
  exempt from the changes to the normal pension
  age.
• The normal pension age will be linked to
  increases to the state pension age.

5
Proposals (2)

• A flexible retirement scheme will be introduced
  which will be available to members from age 55.
• The employee contribution rate for members of the
  final salary section will increase to 7.5.
• Pension increases (for pensions in payment) will
  be inflation proofed in line with increases in
  the Consumer Prices Index (CPI) subject to a 5
  p.a. inflationary cap.

6
Proposals (3)

• Pensions in deferment will be increased by CPI or
  2.5 p.a., whichever is the lower.
• A Career Average Revalued Earnings (CARE)
  benefits structure will be implemented for new
  entrants.
• The contribution rate for members of the CARE
  section will be 6.5.
• Cost sharing will be introduced with cost
  increases shared in the ratio 6535 between
  employers and employees respectively.

7
Proposals (4)

• A new right to retire on a reduced basis from age
  55
• With effect from 01 April 2013, Members made
  redundant from age 55 are entitled to a reduced
  benefit only

8
What stays the same

• Death In Service Benefits
• Incapacity benefits
• Added Year Additional Voluntary Contribution
  contracts
• Transfers-in
• Employer still contributes 16 of salaries

9
Consultation Period

• Begins 20 October 2010 and to last more than the
  statutory 60 days (23 December 2010).
• Current and prospective members of USS will
  receive consultation documentation
• Providing members with an opportunity to respond
  to the proposed changes

10
Consultation Period (2)

• Dedicated USS Consultation website
• Trustees must consider the opinions raised by its
  membership but do not have to act upon them
• Members and prospective members will receive
  notification of the outcome of the Consultation

11
Consultation Period (2)

• Dedicated USS Consultation website

12
Consultation exercise actions taken

• Meeting arranged with UCL unions in mid October
• Consultation documents sent to eligible
  employees 6600 locations!!!
• UCL email address ussconsultation_at_ucl.ac.uk
• USS eligible email sent Tuesday evening
• New contracts being sent have revised wording and
  consultation document enclosed
• Front webpage of Pension Services changed

13
Consultation exercise actions to be taken

• USS website will be updated with new QAs as
  consultation period progresses
• UCL will issue reminder email(s) before the end
  of the consultation period 22nd December 2010
• USS JNC will meet in late January to make
  decision
• Feb Mar 2011 decision conveyed to all eligible
  employees
• April onwards New scheme booklets

14
Consultation exercise Considerations

• Adverts New employees, not previously in USS,
  starting after 31 March 2011 may not be entitled
  to final salary defined benefits CARE instead.
  Be aware that advert should not state final
  salary pension scheme but instead defined benefit
  pension scheme
• At interview (preferably) or at verbal offer
  stage, need to identify whether employee has been
  in final salary section of USS in previous six
  months to joining UCL to ensure correct
  contributions deducted 7.5 or 6.5

15
Further information Questions

• USS consultation website
  www.ussconsultation.co.uk
• Pension Services Website www.ucl.ac.uk/hr/pensions
  
• UCL email ussconsultation_at_ucl.ac.uk
• Questions