Provost message on USS Pensions: 2018 valuation consultation – alternative contribution structures

These structures, in the Trustees’ view, would allow the 2018 valuation to be completed. So UUK is now once again consulting with USS employers on which of the three options they prefer, and I would like to do all I can to make sure I know what the views of UCL members of the USS scheme are.

UUK have given employers very tight deadlines for comment: we have been asked to submit our response to UUK by 30 May, but UUK have agreed an extension so that we can discuss our formal response at Council on 3 June.

UCL has received an advisory note prepared by the UUK actuarial advisors AON, as well as questions and answers from UUK on the three options. These can be found on the UCL HR website, along with the USS Trustee’s reply to UUK’s feedback and questions on the 2018 Consultation. These documents contain details of the options, including the rationale and conditions associated with each. The three options are summarised as follows:

1. Upper Bookend – 33.7% (23% for employers and 10.7% employees) to apply from April 2020
2. Lower Bookend and contingent contributions* arrangement – initial contributions set at 29.7% (20.4% employer, 9.3% employee), and three potential 2% contribution increases should scheme funding deteriorate, potentially taking the required rate to a maximum of 35.7%. *Please note, this contingent contribution arrangement is not the same as the version previously proposed by UUK/Aon.
3. A 2020 valuation approach – an initial contribution rate of 30.7% (21.1% for employers and 9.6% employees) to apply from October 2019. A 2020 valuation would be undertaken and, subject to that and ongoing discussions with stakeholders, the contribution rate would remain unchanged until 1 October 2021. In the event of there being no agreement on an alternative schedule of contributions following the 2020 valuation, a default rate of 34.7% would apply.

USS indicate that, because of the timescale associated with implementing option 2, if employers go for that option then we would also need to agree either option 1 or 3 until option 2 could be implemented.

None of these options exactly matches the proposals from the Joint Expert Panel (JEP) so none looks attractive. Option 3 would at least preserve current benefits for an increase in contributions that is less than the upper bookend and allow time for the JEP to conclude the second stage of its work this Autumn and to bring forward recommendations that could avoid the default increase in October 2021. So it appears to be the option closest to the conclusions of the JEP’s first report.

I am keen to hear from you to help shape the UCL response. Taking feedback into account, we will formulate UCL’s position on 27–28 May and the draft formal submission to Council will be shared with UCL’s USS members.

We’ve created an online form for you to share your view on the options, named or anonymously. Or if you prefer, please share your feedback through your Head of Department. All comments received by 12pm on Monday 27 May will be reviewed before submitting UCL’s formal response.

I would also like to take the opportunity to thank those of you who have already shared your feedback.

Once the consultation has closed, UCL’s response, together with FAQs compiled from responses to the online form, will be available on the HR website.

Kind regards,
Professor Michael Arthur
President & Provost