USS Projected DB Pension mostly worse Since April 2024

bluebirdy

Yeah, it’s still worse for me also if I want to retire early. Given the state of most university finances and they’re likely need to shed older, expensive staff soon this seems bonkers, though that isn’t USS responsibility. But it means some of us may well now have to hope for voluntary redundancy opportunities.

I wonder if things are better for younger members (at least in respect of pension, if not [*looks airily at the carcrash and explosions all around*] “everything else”?

swindiff

My Retirement Builder is now showing as being better from the age of 60, but if you take into account the reduction in the Investment builder and use the valuation of 20x then I am actually worse off until around the age of 64.  They have really made retiring early much less attractive with these new early retirement factors.

Asimovs_nightfall

The distribution seems to have gone from the DC element to the DB element - based on projections.  So this provides more certainty over the retirement period.  Isn't this what USS members wanted?

ussdave

Asimovs_nightfall said:

The distribution seems to have gone from the DC element to the DB element - based on projections.  So this provides more certainty over the retirement period.  Isn't this what USS members wanted?

I think you've misunderstood.  The issue isn't with the rebalancing from DC to DB (as you called out, that is what was desired).  The issue is that the ERFs have been adjusted in such a way as to have a significant negative impact on anyone retiring early.  For many planning to retire before normal pension age this ERF change has essentially cancelled out the expected increase in RB.

2nd_time_buyer

swindiff said:

My Retirement Builder is now showing as being better from the age of 60, but if you take into account the reduction in the Investment builder and use the valuation of 20x then I am actually worse off until around the age of 64.  They have really made retiring early much less attractive with these new early retirement factors.

Not disagreeing but just pointing out - the 20x is pretty arbitrary and depends on personal judgement. I factor in 30x, which roughly coincides with current annuity rates. Over the last 25 years I have been in the scheme, I would not have traded the benefits for much less than 30x at any point.

swindiff

I just used 20x as that is what is used to calculate the LTA, or should I say was?

NickBFS

swindiff said:

I just used 20x as that is what is used to calculate the LTA, or should I say was?

I can see your logic but the value of the pension for LTA purposes and the value of the pension to you are not the same thing. I would have thought that a more appropriate calculation would use a different multiplier depending on retirement age, based on remaining life expectancy. Assuming a life expectancy higher than 80, compared to your figures, it would make your figures worse off the further below 60 you are but better off the further above 60 you are.   

NickBFS

ussdave said:

Asimovs_nightfall said:

The distribution seems to have gone from the DC element to the DB element - based on projections.  So this provides more certainty over the retirement period.  Isn't this what USS members wanted?

I think you've misunderstood.  The issue isn't with the rebalancing from DC to DB (as you called out, that is what was desired).  The issue is that the ERFs have been adjusted in such a way as to have a significant negative impact on anyone retiring early.  For many planning to retire before normal pension age this ERF change has essentially cancelled out the expected increase in RB.

I agree on the need to distinguish the effect of rebalancing from DC to DB resulting from the change in accrual rules and the effect of the change in ERF factors. It is also beyond doubt that members retiring early will be worse off than if the ERF factors had not changed.

As to the combined effect of the change to accrual rules and to the ERF factors, the problem is that each situation will be different. I must confess that I was fearing the worst and the figures work out OK for me. 

FIREmenow

Judging by some unorganised screenshots, my RIB seems to have increased £2.6k (18%) at 66. I'm 39 and earn just under £40k so the higher cap doesn't change anything yet.

swindiff

bluebirdy said:

I have been patiently waiting until tomorrow. I also predict it will break tomorrow…

You called it, just a day out lol