USS Pension fund in crisis

savingsguy

I contribute to USS (university pension)
I'm considering investing a part of a lump sum into my pension as it may be a good tax efficient approach.
However I'm really worried about USS fund:
https://www.bbc.com/news/business-49194091
I'm unsure if I should rather scrap my contributions and open a SIPP.
Does anyone use USS and what are your views on this?

londoninvestor

Thread on the Pensions board:
https://forums.moneysavingexpert.com/discussion/6032268/what-is-actually-going-wrong-with-the-government-this-uss-scandal-is-shocking

Southend1

Stopping your contributions to USS and using a SIPP instead would be a really bad idea. You would lose the benefit of significant employer contributions and guaranteed pension income in retirement. The current debate around USS funding is largely around the technical assumptions used to value pension liabilities and doesn’t affect your pension already built up. By some measures the USS is in surplus. The huge deficit figures quoted are based on USS closing, all universities going bust and an insurance company taking on the responsibility of paying pensions- which is not going to happen.

savingsguy

Thank you for this. I didn't really understand the USS pension crisis which has been in the media.

SonOf

savingsguy wrote: »

Thank you for this. I didn't really understand the USS pension crisis which has been in the media.

It is not really a crisis. Much of it has come about from the move to valuing liabilities in full and using much more pessimistic assumptions that increase the liability beyond what is likely.

Its an issue rather than a crisis. Certainly not an issue that requires you to opt out.

grumiofoundation

I contribute to USS and DO NOT under any circumstances stop paying contributions to invest elsewhere. You will lose the employer contribution (currently 19.5%) not to mention the fact it is (currently) a guaranteed income in retirement.

Even if the pension does change to defined contributions rather than the current defined benefit keep paying in!!!

justforlaugh

Do you guys think it is a good idea to make extra contributions to USS besides the default normal contribution?
Not much knowledge about SIPP.

System

justforlaugh wrote: »

Do you guys think it is a good idea to make extra contributions to USS besides the default normal contribution?
Not much knowledge about SIPP.

You can make additional contributions through USS into the USS Investment Builder and benefit from salary sacrifice (thereby avoiding NI as well as tax) and avoiding the costs of a SIPP: https://www.uss.co.uk/members/members-home/the-uss-scheme/uss-investment-builder

Southend1

Economic wrote: »

You can make additional contributions through USS into the USS Investment Builder and benefit from salary sacrifice (thereby avoiding NI as well as tax) and avoiding the costs of a SIPP: https://www.uss.co.uk/members/members-home/the-uss-scheme/uss-investment-builder

But only if your employer allows salary sacrifice on additional contributions. Mine does, but only on an additional 1%. Anything above that is not salary sacrificed.

Southend1

justforlaugh wrote: »

Do you guys think it is a good idea to make extra contributions to USS besides the default normal contribution?
Not much knowledge about SIPP.

It will depend on your individual circumstances and retirement plans. In my situation, I concluded that a S&S LISA was better for additional contributions than USS because my employer doesn't allow salary sacrifice on additional contributions (except for an additional 1%) and I am a basic rate taxpayer.

taka

For normal contributions for the DB pension - do not opt out as you will miss out on guaranteed pension as mentioned above.

For any extra contributions (which go into the Investment builder aka DC part of USS),

• Check whether your university allows you to do this via salary sacrifice or not. If yes then this also saves you NI too as others mention. Not all unis do...
• Currently many of the costs associated with the DC section are subsidised meaning the costs are likely to be lower than a SIPP. There is info in the members area on this.
• If you intend to work until USS scheme retirement age (which will rise roughly in line with the state pension) the DC part may be able to be used to take up to 25% tax free of the combined DB / DC notional value rather than just the standard payment of 3 times your pension tax free (or having to exchange part of your pension for a larger lump sum).
• If you wish to retire early then it is worth reading up on the info in the members area on this and decide if this will work for your plans.

I'm one of the lucky ones whose employer does allow salary sacrifice for all contributions so I put my additional contributions into the income builder section. Too old for a LISA!