Trying to understand annual allowance calculation in USS member statement

d6fs1l

I am trying to understand the annual allowance calculation in my USS member statement for 2023-24.

In that period my retirement income builder pension has risen from just under £20k to around £21.5k (in round numbers).

So my DB pension input is going to be zero as the opening value when adjusted by the relevant CPI figure of 10.1% is higher than the closing value. Several online calculators plus my own arithmetic produce the same answer.

I have investment builder contributions in 23-24 of around £16k (including employer contributions).

And yet my annual statement says I've used almost £29,500 of my annual allowance!

Looking back at other years, the calculation also seems incorrect.

Is there some subtlety here that I am missing in the way USS reckons how much annual allowance you've used?

Thank you for any help. And before anyone says it -- yes, I will ask USS, but it takes a while to get answers from them.

gwt1965

I was also stumped by the AA figure on the 23/24 statement. For the last few years I've been able to calculate the amount to within a few tens of pounds using USS's estimation method but this year I was out by £4k. No idea why. 

d6fs1l

Thank you for the reply.

I suspect the £4k variance is the impact of the benefit uplift resulting from the recent valuation. That gives many members an additional £215 of retirement builder income. 215 * 19 is just over £4k (using the USS estimation of annual pension input, which includes the lump sum element).

However...  the USS estimation method seems to be flawed, because it does not take account of the inflationary increase in opening benefits that is part of the calculation of defined-benefit pension inputs. (I think!)

If you use an alternative calculator (e.g. there is an M&G one online -- I can't post links) you get figures which are quite different (but which I believe are correct).

I've looked back and the USS figures seem consistently wrong. This seems so fundamental that I can't quite believe I'm right -- surely I'm missing something. But I can't figure out what!

gwt1965

If it is the uplift then that would bring my calculation to within £120 of the AA figure on the 23/24 statement. Not perfect, but just about good enough to give some reassurance that the suggested USS method is reasonably accurate. Although it doesn’t, as you say, seem to match the DB calculation method used elsewhere.