Is now a good time to join USS or should I wait?

coolit

Thank you so much to everyone for your responses! As I said I have done a lot of reading on this myself & do understand what most of the terms mean, but without having conversations like this it's difficult to put them into context. So again I really appreciate any advice/experiences. 

A few people have asked questions, so I'll answer them all in one block:

1) USS is a duo scheme, with the majority of my contributions going into a CARE scheme. If I make above a certain amount of money (unlikely to apply to me any time soon, if ever) or transfer in from another pension, those contributions will go into a DC pot. My current University pension is a 'cash balance' scheme. Very little info as to what this means in the info from the provider.

2) With my current auto-enrolled pension I can increase my contributions to 10%. I can also choose to reduce my contributions later on.

3) I don't believe there is a time-limit for my applying to USS. Either way I would like to have made a decision in the next few weeks so don't think this will apply.

4) I can transfer into the USS scheme from other pensions - as stated before it goes into a Defined contribution pot. 

5) I am 27 y/o. From my understanding CARE schemes are better for those earlier on in their careers, as I am. 

Thank you again!

Albermarle

 I am 27 y/o. From my understanding CARE schemes are better for those earlier on in their careers, as I am. 

Defined Benefit schemes are normally in a different league to DC schemes , whatever age you are .

2nd_time_buyer

With the current scheme, can you confirm the employer contribution is 27%? This figure will make a big difference on the desirability.

coolit

2nd_time_buyer said:

With the current scheme, can you confirm the employer contribution is 27%? This figure will make a big difference on the desirability.

No, I misread the information. At 10% contribution my employer contributes 17% - making total 27%. 

Going back to read all of this information again with some outside perspectives is helping me see that the USS pension is perhaps the better option, despite the ongoing talks. 

grumiofoundation

As above the 'returns' offered by USS are very attractive compared to any DC pension

1/75 of annual salary plus 3/75 as lump sum for every year you are in in return for ~10% (pre-tax) contributions.

If your university makes pension contributions by salary sacrifice then you also save NI (and student loan repayments if applicable) on these pension contributions making it <7% of take home pay. 

You may also be able to make additional contributions to the DC option of USS (Investment builder) via salary sacrifice. Think different institutions have different limits on this (I am limited to additional 1% via salary sacrifice). In this case university will also subsidise investment charges. (For transfers in charges between 0.1 and 0.3%)

2nd_time_buyer

Even at 17% that is  very generous.

Whilst the USS pension on the surface seems like higher total contributions, a sizeable proportion of that is paying off a (debatable) deficit.

The proposal put forward from the Universities involve reducing the salary at which the scheme switches from DB to DC to £40k, a 1/85ths accrual rate (from 1/75ths), and a 2.5% per annum indexation cap.

This is not too popular with the unions. My guess is that it will end up somewhere between the current scheme and the employers proposal (but nearer the proposal).

For reference when a fully DC scheme was proposed back in 2018 the employer contributions were proposed at 13.25% so lower than your current arrangement.

If I was was in your shoes I would lean towards joining the USS. However, it is not clear cut and I would be tempted to see how the negotiations over the next few months go. 

hyubh

coolit said:

I misread the information. At 10% contribution my employer contributes 17% - making total 27%.

An educated guess, but is it the University of Sheffield's staff pension scheme...?

https://www.sheffield.ac.uk/polopoly_fs/1.123309!/file/USPS_FRP_Member_Guide.pdf

Revaluation according to that document (which must be pre-2016, given the references to the State Second Pension) is CPI capped to 5%. So the value of your pension in real terms will go down when inflation goes above 5%, and will never beat inflation. Further, the scheme does not offer its own annuities at preferential rates at the end, you're on your own with an insurer (if a retirement income is what you want). But even so, the concept of 'early retirement' (before scheme normal pension age of 65) still applies, as if it were a final salary or CARE DB scheme.

To others suggesting things aren't quite so black and white given a 17% employer contribution rate, I would say, OK, but this is worth less than 17% in a DC scheme, the more so the younger the member is.

2nd_time_buyer

hyubh said:

coolit said:

I misread the information. At 10% contribution my employer contributes 17% - making total 27%.

An educated guess, but is it the University of Sheffield's staff pension scheme...?

https://www.sheffield.ac.uk/polopoly_fs/1.123309!/file/USPS_FRP_Member_Guide.pdf

Revaluation according to that document (which must be pre-2016, given the references to the State Second Pension) is CPI capped to 5%. So the value of your pension in real terms will go down when inflation goes above 5%, and will never beat inflation. Further, the scheme does not offer its own annuities at preferential rates at the end, you're on your own with an insurer (if a retirement income is what you want). But even so, the concept of 'early retirement' (before scheme normal pension age of 65) still applies, as if it were a final salary or CARE DB scheme.

To others suggesting things aren't quite so black and white given a 17% employer contribution rate, I would say, OK, but this is worth less than 17% in a DC scheme, the more so the younger the member is.

To be clear, I agree it looks pretty back and white based on the current USS scheme. However, that might not be the case for what comes out of the consultation e.g. the proposed CPI cap at 2.5% (from 5% currently) could potentially make a huge difference to younger members and erode benefits in real terms.

PS. That Sheffield scheme PDF you sent out looks like the kind of document by daughters primary school send out - just missing the comic sans font!