USS - General discussion

LL_USS

Hi everyone,

I only have a small DC pot with USS and still have quite a long way to go till retirement.

I have chosen: using All funds, Do it for me, for All current and future contributions, and Default Lifestyle Option.

I am thinking of some experiment, to see if, for e.g. I can move the funds now to something less risky, more cash base for a while when I don't have lots of trust in how the stock market will be for the time ahead.

If I go ahead experimenting this then I can choose Let me Do it, and I think we only have the option of Moving all existing and future funds to, say USS liquidity funds, and leave them there for a while till I feel more confident and buy stocks again.

Leaving aside whether the idea is quite unconventional, is it what we do if we want to do that?
Thanks

Barralad77

I’m fairly confident you can switch from ‘do it for me’ to ‘let me do it’ although not sure where they deposit the funds. Would make sense for them to put it all in Liquidity, after which you can arrange as you want (e.g., keep some in Liquidity but move the the rest to other funds). But if you anticipate leaving it invested for some time (‘a long way’) then Liquidity shouldn’t be your first choice for too long. It will depend on how many years you have in mind, but other funds would serve you better from the outset, in all likelihood. I have my funds in Liquidity, Moderate Growth and Global Equity (low, medium, and high risk) and the returns have been averaging out at around 5/8/15% (from memory…don’t quote me). You could consider a similar ‘spreading the risk’ approach if you’re risk-averse? But then depending on how far off NPA you are right now, you might already have something similar already (via the ‘do it for me’ route). Not sure it makes any sense to wait and see where you think the market is going and move funds around at a later date, as you may never know when that day will come. 

Nick_Dr1

If you choose the "Let me do it" option, you can choose whether you move all of your funds (future and current), or just future funds, leaving the current funds where they are. or move the current funds and leave the future funds to go where the originally were going.
So to do what you want, you can move all funds to liquidity, and that means that all future contributions will also go into liquidity.
You can then move back to a more conventional allocation later. I think you are allowed only one change per month.
Doesn't affect your DB contributions though, just to be clear.

LL_USS

Thank you @Barralad77 and @Nick_Dr1 for confirming this could be done in principle.

I am not sure yet whether to do any experiment - I am just curious.

I have about 65K in the DC pot and if I work (perhaps with reduced hours gradually) till 60 years of age then it's still about 25 years. So yes a long way. I suppose the idea is to leave the fund all invested and move towards more liquid near the time when I commence my retirement and take it out in TFLS. I am just thinking the stock market is so overvalued at the moment and perhaps, it could be better to step back a bit from high risks for all of the fund. If the market goes through a crisis again it will recover over the long run anyway and it'll be fine if I don't keep looking at how the number moves. 

Again... just curious...

Barralad77

25 years is a long time to weather out any storms in the vast majority of scenarios. I think you’re currently invested in USS Growth fund (and will be for many years to come if you don’t do anything). Over the last 7 years that’s seen a total growth of around 61%. In contrast, the Global Equity fund has grown by around 105%. Given the time remaining, I would seriously consider switching to DIY (I guess it’s DIM, strictly speaking).

LL_USS

I see.... never knew that!

Global equity is highly priced at the moment but yes I should still look into this, thanks

Barralad77

Hello all,

For those who received their annual statement last week, can I ask a question about the figure given for your Lump Sum Allowance. It states that “You’ve used £xxx,yyy of the Lump Sum Allowance of £268,275 at the end of tax year 2024-25” but my figure looked too high, so called USS for clarification. The first person I spoke to said that it reflected the LSA I will have used when I reach 66 assuming I continue to make contributions being made as of 31/03/25. I pointed out that that’s not how it was worded and suggested that that information was arguably useless (I want to know how much I’ve used up ‘now’, not when I turn 66 - especially in light of the fact that I’ll be retiring at 60). She said that I could work out the figure I wanted by using the calculator on My USS. So I went in search of said calculator but in vain. I called a second time and the explanation given this time was that the figure quoted in the statement could be higher than 25% of the value of my pension if I took money out of the Investment Builder in smaller chunks (?). I think I know how to calculate the correct LSA as of today but find it frustrating that USS seem to get even the simple things wrong. Does anyone else have difficulty getting sense out of USS? I’m getting worried as I’ll be taking my pension in a few months’ time and fear they will !!!!!! something up. I did submit an enquiry using the online portal, but after I’d submitted I got the onscreen message “Your enquiry couldn’t be submitted at this time. Please try again later“. Another thing that doesn’t work, then….

d6fs1l

For me it is simply the DB (retirement income builder) lump sum plus the entirety of the DC (investment builder) pot at 31 March 2025 values.

So I think it is assuming I take the DB/DC benefits together in order to maximise the tax-free cash (which means all the DC pot is taken as lump sum) -- a perk well known to USS aficionados of this site! I suspect that is what your second respondent was getting at.

Barralad77

Yes, that is how one of them explained it to me, but that makes no sense because those two numbers aren’t simply added together to calculate your 25% tax-free maximum. It should be calculated as 25% of the value of the pension (which is [DB x 23] + Investment Builder) but if I multiply the LSA figure from my statement by 4 then my pension is valued at over £300,000 more than it’s actually worth. I wish it were so, but it isn’t, alas.

That’s not what she was alluding to, as she did the calculation (same as mine, above) and the LSA (25%) figure came to around £80,000 lower than the figure given on the statement. So I asked what the figure on the statement represented given that it was £80,000 higher than the figure she herself had just calculated and that’s when she came unstuck.

By way of an example. Imagine someone joined USS fairly recently so has only a small DB but has shoved a lot of money into the IB:

DB - £5,000 per year plus £15,000 one-off LS
IB - £200,000

The statement would add the £15k and £200k together and say that ‘you’ve used £215,000 of the LSA of £268,000’ and give the impression that you could take all £200,000 from the IB tax free.

But that would be completely misleading, as you would only be able to take 25% of the total value of the pension which would be (23 x 5,000) plus £200,000 = £315,000. Divide that by 4 to give you 25% and it comes to £78,750.

In other words, you could take £63,750 from your IB pot free of tax; not all £200,000 of it.

d6fs1l

I didn't say that it was right, only how they'd produced the figure!

I agree that the approach is wrong. It probably doesn't matter quite so much for most members of the scheme, though, because the balance of accrual/savings across the DB/DC sections will not be as extreme as in your example. But that's no excuse. 

As it happens, I think the annual allowance figure is also wrong. I've posted about this before but no one really took the bait. I asked USS and got a reply which I thought was also wrong and at that point I gave up.