University Pension: why is it so good?

stuartlondon

My USS pension pays at a rate of 1/80th of my salary per year in the scheme. Some other schemes pay at a rate of 1/60th per year. So if I retired now my USS would pay about 11k per year but other schemes would pay about 15k. So why not opt for a scheme that offers this better rate?

dunstonh

Usually the tax free lump on a 60th scheme is calculated differently to that on an 80th scheme.

With the 80th scheme you get 1/80th for every year and tax free lump sum equivalent to 3/80ths of pensionable salary for each year of pensionable service.

A 60ths scheme will (generally) not have a tax free lump as default. It will be offered as an option where you sacrifice some of the income to get the lump sum. A rule of thumb would be that if you take a tax free lump sum, you would end up with more or less the same on an 80ths or 60ths.

As for why its so good, its paid for by the taxpayer. So look enjoy it while it lasts as there are moves to reduce the burden on the taxpayer.