USS proposed pension changes.

Moneyer

As some of you may know, there are draft proposals for changes to USS (the defined benefit scheme for academics). One of the proposals is the following:

"The final salary section of the USS will be closed to existing members. The final salary benefits that existing USS members build up before the date the changes are implemented will be calculated based on their individual salaries at the date the changes come into force and from that date on will be increased each year in line with the Consumer Prices Index (CPI). This means that benefits at retirement will no longer be linked to a member’s final salary at retirement."

I was told when joining the scheme that each year's contributions bought me a pension of 1/80 of my final salary. I realise they may be able to change what I buy with future contributions, but the implication here is that my PAST contributions will now only entitle me to 1/80 of my salary at the point the change comes in. This is likely to be substantially less, as I still have a few rungs to climb before retirement.

So this seems to be a major reduction in accrued benefits, in a scheme which gave categorical assurances about what was being earned. Can this possibly be legal?

greenglide

So this seems to be a major reduction in accrued benefits, in a scheme which gave categorical assurances about what was being earned. Can this possibly be legal?

You are retaining your already accrued benefits and you pension earned so far will be deferred based on the service and the salary at that point. This will then be index linked by CPI when you retire. For many, many people that will be a good, good deal if they do not expect to see inflation linked wage rises.

I assume this is linked to a CARE type system? Either pension system is not available to the vast majority of the working population and it is horrendously expensive to fund this sort of provision through savings.

Be grateful.

kidmugsy

Moneyer wrote: »

So this seems to be a major reduction in accrued benefits, in a scheme which gave categorical assurances about what was being earned. Can this possibly be legal?

It does seem draconian. Has the union taken counsel's opinion?

(That question is partly rhetorical: in my experience the union was pathetically inadequate on the question of pensions.)

On the subject of USS I had a ding-dong a year or so ago on this forum with another regular poster. I said the scheme was under the weather; he implied it was bursting with health. Draconian proposals rather suggest that I had the right of it. For what little it's worth, I wouldn't be too surprised if it were eventually replaced by a DC scheme.

atush

Given the cost of this scheme, I am surprised it is still running.

given the higher Tuition costs charged, and the increase in complaints about the quality of education that buys, I want to know what they have done with all the cash we are paying? (i have 2 studying at the mo)

The USS pension will still increase indexed. So you will get more than a fraction of your salary when any change happens.

kidmugsy

The thing is, atush, it's either the biggest or second biggest of the private DB schemes. If it crashes it's not clear that the PPF could cope.

greenglide

So in what way is it worse than the LGPS and similar schemes that have changed to CARE (apart from what looks like a lack of phasing in the change).

It is a proposal, presumably it will be watered down?

And it isn't a true public sector scheme is it?

kidmugsy

Moneyer wrote: »

I was told when joining the scheme that each year's contributions bought me a pension of 1/80 of my final salary.

You have to draw a distinction between what you're told in scheme pamphlets, and what the trust deeds say. The pamphlets used to say that your pension would be RPI-linked; it turned out, though, that the actual promise was that they'd be inflation-linked in the same way as "official pensions", so when the latter moved from RPI to CPI, so did USS. Beware of pamphlets!

kidmugsy

greenglide wrote: »

And it isn't a true public sector scheme is it?

No, thank God. When the enraged peasantry decides to string up all the recipients of public sector pensions, the academics will be spared.

Moneyer

greenglide wrote: »

You are retaining your already accrued benefits and you pension earned so far will be deferred based on the service and the salary at that point.

My argument would be that the benefit accrued is the right to a given proportion of my eventual final salary. This accrued benefit is clearly NOT being preserved.

Either pension system is not available to the vast majority of the working population and it is horrendously expensive to fund this sort of provision through savings. Be grateful.

I do appreciate that and I am grateful for what I have, but it isn't really the point. As far as I know, the law doesn't allow one party to repudiate a contract because they decide it is too favourable to the other party.

Also, plenty of highly skilled people work in academia for half the salary they could earn in industry, partly on the basis of things like pension provision. Had they chosen to take double the salary and invest 40% of it in a defined contribution scheme, they probably would have at least comparable benefits and high take-home pay....

Moneyer

kidmugsy wrote: »

The thing is, atush, it's either the biggest or second biggest of the private DB schemes. If it crashes it's not clear that the PPF could cope.

I understand that USS is backed on a last-man-standing basis by all the employers: so the trustees have the right to extract every penny from every university in the country before the scheme fails to meet its obligations. The value of prime central London property owned by UCL, Imperial and others would probably plug most of the funding gap for accrued benefits.

What worries me is that the trustees seem to be in bed with the employers, rather than exercising the powers they have to protect the members.

greenglide

My argument would be that the benefit accrued is the right to a given proportion of my eventual final salary. This accrued benefit is clearly NOT being preserved.

I suspect that the scheme promises to pay you a benefit based on your final salary within the scheme and they will have the right to terminate the scheme at any time. The transition to CARE is a well trodden path these days - presumably it depends on the outcome of the proposals. It could, still, have been worse. CARE is still much better than nothing.