USS proposed pension changes.

Andy_L

Moneyer wrote: »

Yes, I guess that could be the case for people close to retirement. For similar reasons, some people in USS would probably have higher benefits if they'd switched to CA when it was introduced for new members in 2011, rather than in 2016 as proposed. A bit galling given they've been paying contributions at a higher rate than CA members!

But for those of us with a long time until retirement, the biggest worry may be the cap on the CPI indexing. A few years of hyperinflation at any point in the next few decades could wipe out most of the benefits…..

I thought the USS tied itself to the rules for "official" (ie public sector) pensions and thus has no cap to CPI indexation

kidmugsy

Andy_L wrote: »

I thought the USS tied itself to the rules for "official" (ie public sector) pensions and thus has no cap to CPI indexation

"Benefits are increased in line with those for Official Pensions. However, for service/benefits earned since 1 October 2011 these increases are limited when Official Pensions increase by more than 5% pa. For any increase above 5%, 50% of that increase is applied to USS benefits, with an overall cap of 10% pa."

guymo

Andy_L wrote: »

Although, with current pay restraint in the public sector you could well be better of with CPI indexation rather than pay rises depending on your age/career profile

That's certainly true: I am aware of more than one soon-to-retire academic colleague who has discovered that their final pensionable salary is higher than their actual salary because of indexation.

kidmugsy

Although a private scheme, USS is part of the public pensions "club" - I assume to make it easier for people go to and fro to the NHS, scientific civil service, or whatever. I wonder how the brave new world of USS will affect this.

guymo

I have now read the Employers Pension Forum briefing note containing the outline of the proposed changes to USS. There are more changes than I thought. The proposals are:

- as discussed in this thread, the final salary section is to be closed to all members and accrued benefits to be calculated based on salary at the date of closure

- the CRB (aka CARE) section of the scheme will be amended so that there is an upper salary threshold beyond which CRB benefits do not accrue; presumably also no contributions are made

- a Defined Contribution section will be introduced to run alongside the CRB scheme; for members with salaries above the CRB upper threshold, contributions can be made to this scheme at a rate of 6.5% employee / 12% employer.

I don't mind the establishment of a DC section but I fail to see the rationale for the upper earnings limit on the CRB section. What's the difference in terms of liability for the scheme between one professor on £90k and three lecturers on £30k each, in a CRB pension? Doesn't the averaging of salary over the membership period take care of this and mean that there is no difference --- so why introduce the complexity? Can someone explain?

kidmugsy

guymo wrote: »

- a Defined Contribution section will be introduced to run alongside the CRB scheme; for members with salaries above the CRB upper threshold, contributions can be made to this scheme at a rate of 6.5% employee / 12% employer. .....

I don't mind the establishment of a DC section

One possibility is that the CARE section might prove to have a fleeting existence, with everyone eventually going to DC. I suppose this idea will give them some practice at running it on a small scale.

guymo wrote: »

]but I fail to see the rationale for the upper earnings limit on the CRB section.

You'd have to be very cynical to suspect that the most senior people think that USS is in very dire straits, and want the chance to get some of their money into DC. The time to worry is if the threshold approximates to a member ending up with a DB pension at about the level of protection offered by the PPF.

"The cap at age 65 is, from 1 April 2014, £36,401.19 ...

Once compensation is being paid, then payments relating to pensionable service from 5 April 1997 will rise in line with inflation each year, subject to a maximum of 2.5 per cent. Payments relating to service before that date will not increase."


I repeat my advice to young academics: consider clearing off and doing something else with your life.

hyubh

guymo wrote: »

- the CRB (aka CARE) section of the scheme will be amended so that there is an upper salary threshold beyond which CRB benefits do not accrue; presumably also no contributions are made

- a Defined Contribution section will be introduced to run alongside the CRB scheme; for members with salaries above the CRB upper threshold, contributions can be made to this scheme at a rate of 6.5% employee / 12% employer.

Interesting... so the proposals don't include banded employee rates like the LGPS or TPS? (Cf. http://lgps2014.org/content/what-will-new-scheme-cost-me)

kidmugsy

"The USS Trustees estimated that the employers would need to pay a contribution rate of 25.1% in order to retain the current employee benefits. Under the cost sharing rule introduced in 2011 this would mean that the employee contribution rate would have to increase to 12.3%. We consider that these rates are unaffordable for employers and employees alike."

And yet taxpayers can support public DB schemes indefinitely? I think not.

kidmugsy

There's a strange little sweetener in the USS proposals. "Alongside the CRB pension, employees in the USS will be able to pay an additional contribution into a DC section up to the salary threshold and employers will match the contribution up to a fixed amount up to this threshold."

It sounds to be some sort of extra expense for the employers, that will be most valuable for people who happen to have surplus capital to hand. What on earth??

Southend1

kidmugsy wrote: »

"The USS Trustees estimated that the employers would need to pay a contribution rate of 25.1% in order to retain the current employee benefits. Under the cost sharing rule introduced in 2011 this would mean that the employee contribution rate would have to increase to 12.3%. We consider that these rates are unaffordable for employers and employees alike."

And yet taxpayers can support public DB schemes indefinitely? I think not.

I personally would be happy to pay 12.3% and keep our current benefits. Long term the contribution rate isn't likely to stay quite that high. Typical that these assumptions are made that we won't be happy to pay more when it suits the employers!

Universities are becoming pretty grim places to work. Students are now customers, standards are down the pan and it's more like a sausage factory than an educational institution. Decent academics are leaving for better jobs. Pretty soon the international students will cotton on that they aren't getting value for money here and will go elsewhere. Home students won't bother getting themselves into 50k plus of debt for a worthless piece of paper. Sadly the fools at the top have completely screwed our once envied universities.