USS - Increase lump sum or not?

MPLMPL

That's a right kick in the balls. Didn't see this coming, but I assume a result of the reversion to 1/75 accrual and old reevaluation criteria. ERFs typically revised every 3 years, last ones April 2023, so wasn't expecting to have to worry about this until 2026. Planning to retire end of this acedmic year at 55 but wasn't sure whether to access DB or defer a few years, was nervous about delaying beyond April 2026 in case something like this happened at the next ERF revision. This is quite a hit.
I also noticed the example on USS website was specific to post-2011 pension, so unsure how this impacts pre-2011. I fear the worst.

swindiff

It looks like older pension is protected from these reduction.  It does not mention any reduction pre 2011 and gives different levels of reduction between 2011-2020 and 2020 on

https://www.uss.co.uk/for-members/calculate-your-benefits/factors-used-by-uss

For example, if your NPA is 66, you joined USS after 1 October 2011 and you want to retire as an active member before 1 April 2024 at the age of 59:

• Benefits built up between 1 October 2011 and 5 October 2020, which have an NPA of age 65, will be reduced based on you retiring six years early, by applying the Pre 31 March 2022 benefits factor 79.8% to those benefits.
• Benefits built up from 6 October 2020 to 31 March 2022, which have an NPA of 66, will be reduced based on you retiring seven years early, by applying the Pre 31 March 2022 benefits factor 77.1% to those benefits.
• Benefits built up from 1 April 2022, which have an NPA of 66 (subject to any increase in the State Pension Age), will be reduced based on you retiring seven years early, by applying the 31 March 2022 benefits factor 75.3% to those benefits.

If instead you want to retire after 31 March 2024 then the calculation changes to:

• Benefits built up between 1 October 2011 and 5 October 2020, which have an NPA of age 65, will be reduced based on you retiring six years early, by applying the 1 April 2024 factor of 74% to those benefits.
• Benefits built up from 6 October 2020 onwards, which have an NPA of 66, will be reduced based on you retiring seven years early, by applying 1 April 2024 factor of 70.6% to those benefits.

Beckster1964

I have just been on the telephone to USS about this and they confirmed that the new factors will affect all contributory years, including pre 2011 and will come into effect on the 31st March 2024. They also confirmed that the current modeller does not take this change into effect. I was planning to start drawing my pension July 2024, but have now brought it forward to Feb to avoid the changes. Not quite what I wanted but at least I was able to do something about it. Many thanks to Grant1968 for flagging this up - USS certainly kept this under the radar!

swindiff

Well that is pretty terrible news.  How are they allowed to do this to what is supposedly protected pension contributions?

MPLMPL

swindiff said:

Well that is pretty terrible news.  How are they allowed to do this to what is supposedly protected pension contributions?

I'm certainly not happy about it, but I think that all accrued pension, including the pre-2011 service was always subject to whatever the latest ERFs are? These are normally reviewed in the 3 yearly evaluation, so they were changed in from April 2020 and again from April 2023 (slightly less generous than the previous three year period, but I was only down about 1.2%). Using the latest ERFs, my predicted pension will be 66.7% of the full pension if I take at 56, was going to be 74% of full pension. This is my calculation using the new ERFs and taking into account pre-2011 having NRA 63.5, 2011-2022 NRA 65 and post-2022 NRA 66.
The NRAs are protected and the amount accumulated each year, but not ERFs.

Incidentally, unless I've misinterpreted, the reverse commutation appears to be more favourable for converting Retirement Income Builder lump sum into pension? You get £1000/factor of additional pension for every £1000?
Think you can only do this with the RB lump sum though, they stopped reverse commutation of Investment Builder?

swindiff

I actually inquired about this to USS in Feb 2023

Dear Mr *****,

 

I refer to your recent correspondence to your employer, ******* University, regarding your normal pension age (NPA). Your employer has requested that USS, as the pension administrator, provide a response to you.

 

Your defined benefits (DB) have been split in to benefit tranches based on when the benefits were accrued and what NPA they hold, as follows:

 

USS Benefits accrued up to 30 September 2011:                                                 Payable unreduced from age 63 ½

USS Benefits accrued from 01 October 2011 to 05 October 2020:                Payable unreduced from age 65

USS Benefits accrued from 06 October 2020 onwards:                                     Payable unreduced from age 66

 

Transferred in service from LGPS in September 2005:                                       Payable unreduced from age 60

 

Please note that if you elect to retire from active service any time from age 60, with employer consent, your USS benefits accrued up to 30 September 2011 will be payable unreduced from age 60.

 

If you have any further questions, please do not hesitate to contact us.

 

Kind regards,

Grant1968

Well that is 2 of us who have now had these changes confirmed by USS. However, and despite previous form, I am still struggling to believe that USS have brought in such dramatic changes, in a seemingly new retrospective fashion, with absolutely no comms at all. The union are now on the case, so we should have definitive answers soon. If it is all true, we need to start shouting from the rafters; we may not be able to get any of this reversed, but we can at least let colleagues know how significantly the April changes may effect their pensions; rather, naively I thought that was the job of USS...

swindiff

MPLMPL said:

The NRAs are protected and the amount accumulated each year, but not ERFs.

If the NRA's are protected then surely the new ERF's wont affect pension from pre 2011, if the NRA is protected at 60, then there would be no reduction on that part of your pension if you were to retire at 60?

MPLMPL

swindiff said:

MPLMPL said:

The NRAs are protected and the amount accumulated each year, but not ERFs.

If the NRA's are protected then surely the new ERF's wont affect pension from pre 2011, if the NRA is protected at 60, then there would be no reduction on that part of your pension if you were to retire at 60?

If you retire at 60 with a protected NPA of 60, then your pre-2011 is fine. If you retire earlier than 60, then ERFs will apply to the pre-2011 service.
In my case my NPA for pre-2011 service is 63.5. This NPA is protected, if I retire at 63.5 happy days, but if I retire and draw my pension at say 55.5 (to make the maths quick and easy), then it will be subject to an ERF of 8 years. The ERF for 8 years was 74.6% but from 1st April will be 67.5%.

swindiff

Ah I see where you are coming from now.  I was just looking at it from my own selfish viewpoint of planning to retire at 60, so I don't think (hope) this will impact me, but I can see how it would be a lot worse if I wanted to go before 60.