USS annual profile update

2nd_time_buyer

Bit more information to add to the above about contributing above the threshold. My understanding is that the same will apply to the proposed lower threshold. It is telling that this information is very difficult to find on the USS site.

"Currently, part of your employee and employer contribution above the salary threshold (£59883.65) is supporting the schemes defined benefits.  For the employee contribution of 9.6%, 8% is payable to the USS Investment Builder leaving 1.6% to support defined benefits. The employer contribution of 21.1% is split by 12% to the Investment Builder with the remainder supporting defined benefits.  Overall, a contribution representing 20% of pensionable earnings above the salary threshold is payable to the USS Investment Builder."

atw_uss

Interesting - I agree that the information on the USS website is a bit opaque . I'm assuming the various modellers still only relate to the current rules (and it was the UCU one that showed the less than attractive figues moving forward in 2022 - if approved).

I must admit, it does make me wonder whether it would be worth retiring earlier (and/or deferring for a short while). The proposals do look quite brutal, even if more would go into the IB. If the current proposals go ahead then many members might also decide it's not worht their while and retire early, while new people opt out, making it potentially much less sutainable. I hope a compromise can be reached!

2nd_time_buyer

atw_uss said:

Interesting - I agree that the information on the USS website is a bit opaque . I'm assuming the various modellers still only relate to the current rules (and it was the UCU one that showed the less than attractive figues moving forward in 2022 - if approved).

I must admit, it does make me wonder whether it would be worth retiring earlier (and/or deferring for a short while). The proposals do look quite brutal, even if more would go into the IB. If the current proposals go ahead then many members might also decide it's not worht their while and retire early, while new people opt out, making it potentially much less sutainable. I hope a compromise can be reached!

As is probably the case for most pension schemes, most members do not fully appreciate the benefits (or what they stand to lose). Except in the case of the USS it is even more bewildering as the there is both the DB element and the DC element.

The UCU have produced a modeller to illustrate the effects if the changes:

https://www.ucu.org.uk/ussmodeller

However, whilst it includes both the DB and DC elements it does not attempt to evaluate the effect of the proposed changes on the overall package. I suppose you could do this by looking at what additional income could be assumed from the additional DC benefits and adding this to the DB element e.g. from purchasing an  annuity (worst case) or assuming a drawdown rate e.g. 4% (best case).

Simes122

Bit more information to add to the above about contributing above the threshold. My understanding is that the same will apply to the proposed lower threshold. It is telling that this information is very difficult to find on the USS site.

"Currently, part of your employee and employer contribution above the salary threshold (£59883.65) is supporting the schemes defined benefits.  For the employee contribution of 9.6%, 8% is payable to the USS Investment Builder leaving 1.6% to support defined benefits. The employer contribution of 21.1% is split by 12% to the Investment Builder with the remainder supporting defined benefits.  Overall, a contribution representing 20% of pensionable earnings above the salary threshold is payable to the USS Investment Builder."

Yes - doesn't it boil down to:  whatever we pay in added to whatever employer pays in, will result in DB accrual of 1/80 pa under new scheme under the £40k threshold, and 20% to DC above the threshold (simplified).   Anything else being paid in will be to the scheme's benefit in reducing deficit it would seem.   That's how I read it.

Simes122

P.S. the UCU modeller seems to be faulty in that it disregards accrued RIB benefits to date.   So if I put my Salary level in, it's projecting that my annual pension will be considerably lower than is already accrued today.  My RIB won't go down between now and NRD, but it won't increase at the same rate.  

2nd_time_buyer

Simes122 said:

Bit more information to add to the above about contributing above the threshold. My understanding is that the same will apply to the proposed lower threshold. It is telling that this information is very difficult to find on the USS site.

"Currently, part of your employee and employer contribution above the salary threshold (£59883.65) is supporting the schemes defined benefits.  For the employee contribution of 9.6%, 8% is payable to the USS Investment Builder leaving 1.6% to support defined benefits. The employer contribution of 21.1% is split by 12% to the Investment Builder with the remainder supporting defined benefits.  Overall, a contribution representing 20% of pensionable earnings above the salary threshold is payable to the USS Investment Builder."

Yes - doesn't it boil down to:  whatever we pay in added to whatever employer pays in, will result in DB accrual of 1/80 pa under new scheme under the £40k threshold, and 20% to DC above the threshold (simplified).   Anything else being paid in will be to the scheme's benefit in reducing deficit it would seem.   That's how I read it.

Essentially yes.

Although, you have over-estimated the generosity. It is proposed at 1/85 not 1/80pa.

I am not fully clear on the second point. Although, it is worth noting the UCU modeller only projects changes in future benefits. Accrued benefits are unaffected (and will go with CPI as currently).

Simes122

2nd_time_buyer said:

Simes122 said:

Bit more information to add to the above about contributing above the threshold. My understanding is that the same will apply to the proposed lower threshold. It is telling that this information is very difficult to find on the USS site.

"Currently, part of your employee and employer contribution above the salary threshold (£59883.65) is supporting the schemes defined benefits.  For the employee contribution of 9.6%, 8% is payable to the USS Investment Builder leaving 1.6% to support defined benefits. The employer contribution of 21.1% is split by 12% to the Investment Builder with the remainder supporting defined benefits.  Overall, a contribution representing 20% of pensionable earnings above the salary threshold is payable to the USS Investment Builder."

Yes - doesn't it boil down to:  whatever we pay in added to whatever employer pays in, will result in DB accrual of 1/80 pa under new scheme under the £40k threshold, and 20% to DC above the threshold (simplified).   Anything else being paid in will be to the scheme's benefit in reducing deficit it would seem.   That's how I read it.

Essentially yes.

Although, you have over-estimated the generosity. It is proposed at 1/85 not 1/80pa.

I am not fully clear on the second point. Although, it is worth noting the UCU modeller only projects changes in future benefits. Accrued benefits are unaffected (and will go with CPI as currently).

Oops, yes!  1/85

Indeed re the modeller.  It’s just that it gives a slightly misleading impression based on if you joined literally today, this is the pension you’ll get at retirement age.  Probably too complex to do anything else.

one thing is true though - it’s a huge pay cut if you view pension as deferred salary - which it is.