USS Ill-health etc

Tomatillo

Can anyone help me with working out how USS calculate the amounts for ill-health retirement etc if you earn above the salaray threshold? I have been looking at the information for this and for death in service etc and at various points it says 'The salary threshold doesn’t apply when we work out their pension – it’s based on your full salary. This means any contributions from you or your employer over the salary threshold to the Investment Builder will be credited back to USS.' I am trying to work out precisely what this means but can't seem to find an answer. 

If anyone knows what this means I'd be very grateful. 

Marcon

There's very detailed information on the ill health factsheet - have you read that (and are still baffled!), or perhaps not come across it - https://www.uss.co.uk/for-members/life-events/ill-health-retirement and follow the link in the third paragraph, assuming you are currently contributing to USS.

Tomatillo

Hello, thank you yes I have read those sheets (and am a current member).  The same terminology is used throughout including in relation to spouses' and dependants' pensions. I am trying to work out roughly what that would mean. I have to say that I don't find it completely clear. 

My assumption had been that it meant that the calculations were done as if the salary threshold had (i.e. currently £70kish) didn't apply. That would mean that if you were earning e.g. £100k then 1/75 of £100k = £1333.33 would be used to calculate what you would have earned up to age 65. I had also assumed that the same approach would be used to look back at what you earned in previous years had you earned above the cap. This then gives you a higher set of survivors' pensions and lump sum, but you lose any of the standard contributions to the investment builder. That all seemed to be the most natural reading to me, although I am not quite sure how this applies for the various iterations of USS. But the illustration given is someone earning below the salary threshold so it's not clear to me how this all works. 

Unfortunately I am awaiting an appointment at which all of this is likely to no longer be hypothetical so I am trying to make sure that I understand it properly. I asked my pension administrator, who said that it wasn't this at all but instead was a reference to people who had taken the voluntary salary cap, but I think that is probably an error as it specifically refers to the salary threshold.

Tomatillo

Just to add to the above. The majority of what I have currently built up as an annual pension was under the old final salary scheme, not the current career average scheme. I don't know if there are legacy rules that apply to that part. I can't see any of this on the factsheets or elsewhere on the website. 

d6fs1l

You are right that the factsheets do not clearly explain what happens in this scenario when someone is earning in excess of the salary threshold. It is not at all clear what 'based on your full salary' means. Applying the retirement builder accrual rate to your full salary (as you suggest) is one possibliity but there are others. The example given on the factsheet (where the salary is below the salary threshold) then raises the question (for someone earning above the threshold) of how prior years are treated, as you point out. The starting point of that calculation (in the factsheet) is the accrual in prior years, but that accrual will have been subject to the salary threshold. It seems odd if the scheme simultaneously takes back your DC (investment builder) pot while using prior year accrual which was subject to the DB/DC threshold.

I had a very quick look at the scheme rules to see if I could work out what the answer is, but I ran out of time. I did however notice that the provisions for 'crediting back' the DC pot take into account transfers out of it -- which answered my own question as to whether one could transfer out from the invesment builder to avoid the "crediting back"! 

This is a long-winded way of saying that I don't know what the answer to your question is, but I think it's a good question and I would be interested to know what the actual answer is. Sorry not to be of more help (and obviously sorry you are in this position in the first place). Maybe there are other knowledgeable USS folk on this forum who will know the answer.

Tomatillo

Thank you very much for looking into this. I find it very frustrating that they don't have clearer information as it would help with peace of mind in really difficult and uncertain circumstances. 

I very much agree with your comment that 'It seems odd if the scheme simultaneously takes back your DC (investment builder) pot while using prior year accrual which was subject to the DB/DC threshold.' In an extreme that could mean that a person dying the day before retirement was due could have a substantal six figure sum removed for no benefit to the survivors. I can't see that could possibly be fair but the information is completely unclear.

If I find an answer I will put it here for anyone unfortunate enough to have the same question in the future. If anyone has any insight I'd be very grateful. 

ussdave

I can't help but I'm sorry to hear that this is something you need to look into.  I'm sure the extra info you come back with will be really useful to someone in future.