UCU fights and wins on an extension to USS early retirement factor change

UCU fights and wins on an extension to USS early retirement factor change

The UCU Superannuation Working Group (SWG) have been engaged with USS since January 2024 regarding proposed changes to the Early Retirement Factors from 01 April 2024. Early Retirement Factors are the percentage reduction applied to a member’s pension if they retire before their Normal Pension Age (NPA). The further you are from NPA, the larger the reduction.

However, changes proposed from 01 April 2024, if implemented, would have meant a significant difference in pension entitlement between members retiring on 31 March 2024 and from 01 April 2024 onwards. Along with UUK, the SWG Negotiators met USS on a number of occasions to seek a delay to the implementation date. As per this linked USS communication, this change has now been delayed to 01 October 2024.

This delay is very much welcome and will give members considering Early Retirement the time to look at the finances of such a decision, engage their families, engage employers, and take independent financial advice. But 6-months is not long.

Given this, UCU would advise any member who is considering seeking early retirement in the next 12/18 months to take steps immediately to assess their options. It may well be that remaining in employment is the best option, but members should seriously consider all options now.

Financial Information can be obtained from Annual Pension Statements and the MyUSS portal on the USS website. We would encourage members considering early retirement to speak with family and employers now. For those members who see Early Retirement as a real option before 01 October 2024, we would suggest that members engage USS for necessary financial information before seeking independent financial advice. Members should note that UCU has a partnership arrangement with Quilter Financial –  UCU – Financial advice from Quilter Financial Advisers – who may be able to assist.

While SWG are unable to stop the changes to Early Retirement Factors, this delay is significant as it provides members the time needed to consider all options and take advice. And while they will be continuing to meet USS on Early Retirement Factors going forward, they urge members considering Early Retirement to use this time well.

We urge you to complete the USS Pensions Survey

We urge you to complete the USS Pensions Survey

You (USS members) should have received a survey link via email from USS. We encourage you to complete this survey to get UCU member voices heard. The survey will take around 10 minutes to complete but we feel this time will be worthwhile for the following reasons:

  • You will be asked for your views on sustainable investment. Pension funds can only legally decide to opt for a sustainable investment strategy (divestment from fossil fuels etc) if they have evidence that their members want that to happen. USS have never done an explicit survey on this, so surveys like this one are the best opportunity people have to express that view.
  • You will be asked to comment on your “overall relationship” with USS. This question’s results will be reported in the USS annual report, which will expose the feelings of its members to a wide audience.  

Further action you can take towards ethical investment

Most USS members now have a Defined Contribution (DC) pot (the bit USS calls the “investment builder”) because of the 2020-2022 cut to the Defined Benefit (DB) cap. Individuals can choose to have this pot invested normally or invested ethically by logging to the USS portal. Most people don’t know this and therefore leave it with the default (not ethical) option. USS takes this as evidence that members aren’t so bothered about climate change and therefore as a reason not to change investment strategy for the (massively larger) DB section of their investments. So, if you wish to influence USS ethical investment you can opt in to the “ethical lifestyle” investment option.

LUCU Committee

Planned changes to early retirement benefits in your USS Pension

Planned changes to early retirement benefits in your USS Pension

We have recently learned of changes to your USS pension related to early retirement, which USS plans to make on 1st April 2024.  It is important you understand that if you are considering early retirement, the planned changes to Scheme Factors, if they go ahead, could seriously disadvantage you.

We believe it would be prudent for members considering early retirement to urgently:

  1. Write to USS seeking the necessary financial information to inform their decision, asking for  calculations for dates before and after 1st April 2024.
  2. Make contact with HR to ensure the necessary work is completed so as not to delay any decision with USS.  This contact from staff enables HR to notify USS and provide confirmation of notice period.
  3. Seek independent financial advice to inform their decision-making. Members may wish to use the free service for UCU members provided by Quilter Financial  UCU – Financial advice from Quilter

We are reliably informed that the UCU Pensions Negotiators are fighting this change, which was not part of the recent USS negotiations outcome. Nevertheless, at this point in time the change is planned for implementation on 1st April and as the date is drawing near, we wanted to draw your attention to it.

Making Sure You Get Your USS Back Pay – Meeting Recording

Making Sure You Get Your USS Back Pay – Meeting Recording

The branch held an open meeting on Wednesday 31st January to discuss the recent changes to the USS Pension scheme . While it is important that everyone understands what has been successfully negotiated on your behalf, it is especially important that colleagues who have opted out of USS are aware of the implications of how restoration of the lost 2020-2023 benefits will be implemented. There is a significant financial benefit to joining the scheme before 1st April 2024 that will not apply after that date. All staff on grade 6 and above are eligible to join USS.

You can view the recording of the meeting here.

Making Sure You Get Your USS Back Pay

ALL STAFF WELCOME

The branch is holding an open meeting to discuss the recent changes to the USS pension scheme on Wednesday 31st January at 12:30pm. While it is important that everyone understands what has been successfully negotiated on your behalf, it is especially important that colleagues who have opted out of USS are aware of the implications of how restoration of the lost 2020-2023 benefits will be implemented. There is a significant financial benefit to joining the scheme before 1st April 2024 that will not apply after that date.

As this is an open meeting, all Loughborough staff are welcome to attend (all staff on grade 6 and above are eligible to join USS).

Click here to download an appointment for your calendar (including the link to join the meeting). You will need to open the downloaded file and then click the button to save it to your calendar.

Important News – USS Changes Explained

Important News – USS Changes Explained

One of the positives from the recent pensions victory is that joining the USS Pension should be more affordable, notwithstanding that we are still in a cost-of-living crisis. From 1 January, contribution rates should lower for employees from the current 9.8% to 6.1%. This means that a person on £30,000 salary should save £1,110 per year in contributions.

£215 Payback Payment

To qualify for the £215 pension payment, a scheme member must have active service in the scheme before 1 April 2024. Members need to earn £16,125p.a. to get £215 of pension. This will increase with inflation until retirement and be paid each year in retirement. This means the value of the payment for a person aged 50 now, who retires at 66 and claims their pension for 25 years, is around £13,000 if we estimate average inflation at 3%. However, if a person waits until after 31 March 2024 to join the scheme, they will not be entitled to this payment.

Accrual Rate & Inflation Cap

From 1 April 2024, the change in accrual rate from 1/85 to 1/75 will mean that the amount of money going into your pension pot each year will be higher, so your pension will be worth more. Also, the changes to inflation protection from the current max of 2.5% to the soft cap max of 10% means your pension will grow more. The change in threshold for DB/DC means that more money goes to DB meaning members get a better return when they retire.

LUCU Committee

UCU Members Get Results!

UCU Members Get Results!

Image credit Aisling O’Beirn – https://aislingobeirn.com/@aislingbeirn

Congratulations to all our members both locally and nationally who contributed to industrial action, forcing our employers to reverse pensions cuts. Your commitment has not gone unnoticed by other members of staff, who have expressed their thanks. This has been a big win for all university employees who hold USS pensions – but it would not have been achieved without our committed members, both here at Loughborough and across the sector. Go to the USS Modeller to see how much better off you’ll be following the restoration of our benefits. 😊 

Without a committed membership, we have no strength! Our next push is to build on this win by increasing our numbers. So, let’s make a noise about our success! Members talking to colleagues not yet unionised is the most effective way we can recruit. We’d appreciate it if every member would speak to at least three colleagues to encourage them to join us, using this link: join.ucu.org.uk. You can also help spread word of our win and encourage membership by liking and sharing/retweeting these social media posts: Twitter/X and Facebook. The more members we have, the more we can achieve! 

UCU Member Consultation – Recovery of USS Benefits – Please Vote

UCU Member Consultation – Recovery of USS Benefits – Please Vote

This request to vote is from UCU and is separate from the USS member consultation you were recently asked to complete on the USS website.

Following on from last week’s announcement that justice has prevailed in our long fight to win back our USS pensions, the employers’ representative body Universities UK (UUK) has already agreed to reverse the 35% cut made to the guaranteed income you will receive in retirement (i.e. ‘benefit restoration’) and to recover what has been lost (i.e. ‘benefit recovery’).  The agreement with UUK is recommended unanimously by UCU’s USS negotiators and by the Superannuation Working Group (SWG). On Friday 6 October 2023, the elected representatives on UCU’s higher education committee (HEC) agreed to now formally consult you on benefit recovery proposals.  

HEC is recommending that you vote YES (agree) to ACCEPT the benefit recovery proposals.

For your unique personal voting link please refer to the email from UCU sent around 4:30/5pm on Monday 9th October with Subject: IMPORTANT: UCU member consultation on recovery of USS benefits.

This formal consultation opened on Monday 9 October 2023 and will close on Friday 20 October 2023 at 12 noon, and UCU will announce results as soon as practicable. 

Please make sure that you have your say by voting on the USS proposal. 

LUCU Committee

Negotiations with Universities UK (UUK) over the restoration of our USS pension benefits

Negotiations with Universities UK (UUK) over the restoration of our USS pension benefits

On Wednesday 20 September 2023, the Superannuation Working Group (SWG) gave a presentation on negotiations with Universities UK (UUK) over the restoration of our USS pension benefits.

A video presentation by the UCU official responsible for USS, Dooley Harte, was recorded and is available here

The slides from the presentation are available here.

There was also a question and answer session but this was not recorded for confidentiality reasons. Members present used the chat function in Zoom to ask a number of questions. UCU have answered these questions in a document which is available here.

The SWG continues to engage UUK and USS on restoration of pre-2022 benefits, augmentation/recovery and combined contribution rates and further information on these will be issued when we receive those updates.

If you have not yet completed the USS members consultation, please read this article on our website and then complete the consultation before it closes on 24th November.

USS Consultation – how we can act to restore our pensions

USS Consultation – how we can act to restore our pensions

The following article is long, but very important if we are to secure the restoration of our pensions.  We are extremely close to finalising this win, but we are not there yet.  Please read the information below and respond accordingly to the USS member consultation, to ensure the changes we want go ahead. In the red text boxes below, you will find UCU’s suggested considerations when you fill out your own consultation form. Further details on how to complete the USS Members Consultation can also be found towards the bottom of this article.

Additionally, we share details of the response Loughborough University is making to the employer’s consultation

Members’ Consultation

USS has launched a consultation with members about the future of the scheme, and in particular what level of benefits members would like to receive.  It is important that as many members as possible feed their views into this consultation to strengthen our negotiators’ position.

Please note that it is essential for members to respond individually to this consultation, because in previous consultations, where members cut and pasted a set of responses, we know that these were disregarded by USS and UUK. 

Below, we have provided explanations regarding the changes to help you understand the questions and, in white text on red backgrounds, suggestions to help you formulate your own responses. The consultation includes questions on the issues that are highlighted below in bold, and there is an opportunity to make additional comments. There is not a question that asks specifically whether you support a contribution rate of 20.6% versus UCU’s preferred 26% rate.

Please consider recommending a rate above 20.6% in the comments box to help our negotiators gain agreement from Employers to adequately support their employees’ pensions – instead of using the review of USS as a mechanism for reducing their costs.  Employers reducing contribution rates too far dramatically increases the risk of future valuations leading again to benefit cuts, necessitating further industrial action, and repeating the exhausting cycle we have seen in recent years.

Salary threshold increase

You build up benefits in the defined benefit part of the scheme, the USS Retirement Income Builder, on your salary – up to the salary threshold. If you earn above the salary threshold, you’ll contribute to the defined contribution part of the scheme, the USS Investment Builder too.

From 1 April 2022, the salary threshold was reduced from £59,883.65 to £40,000, and the inflation cap on the annual increases applying to that threshold was changed from 10% to 2.5% (as described below). If the April 2022 changes had not taken place, it is likely that the salary threshold would currently be around £66,400.

At the moment, the salary threshold is £41,004, and it increases every year in line with Consumer Price Index (CPI) inflation to a maximum level capped at 2.5%.

It’s proposed that, from 1 April 2024, the salary threshold increases to between £66,400 and £73,040 (the final level to be determined by the rate of CPI inflation to September 2023) and that annual increases continue in line with CPI inflation but to a higher cap of 10%, applied as follows:

  • Where CPI inflation is 5% or less, the increase is matched.
  • Where CPI inflation is more than 5% but less than 15%, the increase will be 5% plus half of the percentage increase above 5%.
  • Where CPI inflation is 15% or more, the increase applied shall be 10%.

This change would broadly put the salary threshold at the level it would have been were it not for the 1 April 2022 change, and would mean that a greater proportion of benefits is built up in the defined benefit part of the scheme, the USS Investment Retirement Income Builder, for members whose salary is higher than the current salary threshold. This also means that these members would build up less savings in the defined contribution part of the scheme, the USS Investment Builder. If a member’s salary is below the current salary threshold, the increase to the salary threshold will not impact that member’s benefits.

Please consider expressing support for an increase to the salary threshold at the level it would have been were it not for the 1 April 2022 pension cuts, and expressing support for a return to a 10% inflation cap in order to protect the value of our pensions.

Accrual rate increase

In the defined benefit part of the scheme, the USS Retirement Income Builder, you build up benefits at a rate of 1/85 of salary each year (up to the salary threshold) and 3/85 of salary as a lump sum received on retirement.

It’s proposed that, for benefits built up from 1 April 2024, the accrual rate will increase to 1/75 of salary and 3/75 of salary for the lump sum.

This change would re-introduce the accrual rate that was in place before 1 April 2022, and would mean that a higher rate of benefits would be built up in the defined benefit part of the scheme, the USS Investment Builder, than now.

Please consider expressing support for increasing the accrual rate to 1/75th of salary and 3/75th of salary for the lump sum.

Higher cap on future pension increases

In the defined benefit part of the scheme, the USS Retirement Income Builder, the benefits you build up each year are “banked” and increased before and after retirement in line with Consumer Price index (CPI) inflation subject to a cap of 2.5% (deferred to 1 April 2026 but applying to benefits built up from 1 April 2022).

It’s proposed that the cap increases to a maximum of 10%, to be applied as follows to benefits built up from 1 April 2022:

  • Where CPI inflation is 5% or less, the increase is matched.
  • Where CPI inflation is more than 5% but less than 15%, the increase will be 5% plus half of the percentage increase above 5%.
  • Where CPI inflation is 15% or more, the increase applied shall be 10%.

This change would re-introduce the cap on increases that was in place before 1 April 2022, and would mean that the more benefits built up in the defined benefit part of the scheme, the USS Retirement Income Builder, the higher the rate of inflation protection applied to them would be, if inflation is higher than 2.5%.

Please consider expressingsupport for a return to the cap on increases that was in place before 1 April 2022, to a maximum of 10%, in order to maximise the protection to our pension values.

Contributions above the salary threshold to the defined contribution (DC) part of the scheme, the USS Investment Builder

Currently, 20% of your salary above the salary threshold (8% from your contribution above the salary threshold and 12% from your employer) is paid in to the defined contribution part of the scheme, your USS Investment Builder.

Whilst it is proposed that the overall 20% of salary above the salary threshold to the USS Investment Builder remains unchanged, the JNC will confirm, later in the year, whether the proposed share of member and employer contributions within that 20% will change. The JNC will determine this share of contributions into the DC part of the scheme, the USS Investment Builder based upon the overall rate determined by the Trustee for the benefits proposed.

Please consider expressing support for employers’ continuing to payat least the current 12% rate of contributions, rather than reducing their contribution rate in favour of members paying a greater percentage into the DC part of USS.

Completing the USS Member Consultation

You may complete the USS members consultation form here: Log in – Member – USS Consultation 2023. To access the form, you will need you USS member number and your national insurance number. This consultation closes on 24th November. 

Employers’ Consultation

We are pleased to report that branch officers had two meetings with senior managers to discuss their response to the USS Employer Consultation prior to producing the statement below.  They have agreed to share it with UCU members in the interest of transparency.

Please find below the statement that Loughborough University has sent to USS as part of the Employers’ Consultation, where they provide their views on a resolution to the pension dispute. 

We are broadly supportive of the assumptions in the valuation but would welcome further consideration of specific elements. Whilst the valuation, and likely outcomes, are positive, on-going work streams and the subsequent Investment strategy review may potentially be limited by the decisions made at this stage, and we would therefore like to see prudence in utilisation of the surplus in order to maintain headroom for future decisions. 

We support the return to pre-April 22 benefits, with contributions of 14.5% and 6.1% for employers and employees, respectively. We would support the surplus being used to provide additional stability for future valuations and contribution rates – for clarity, we mean we do not support further contribution rate reductions at this stage given there is still medium-term uncertainty. However, whilst we do not support a rate above 20.6% at this stage, we would not assume that any changes introduced by the on-going stability workstream would be funded by immediate recourse to benefit reductions i.e. we would consider some increase in rate, ahead of benefit reduction, should clear stability measures be needed and agreed. 

We would support augmentation of benefits if these can be applied equitably and simply, and understand actuarial work has been carried out to cost options in this space. We would welcome swift resolution of the 2022 triennial valuation process to reduce contributions as early as possible for colleagues and institutions, with January 2024 being theoretically achievable, this taking priority over augmentation if necessary. 

The enhanced covenant support measures can have a significant impact on employers, and we would welcome consideration on how this could be mitigated in light of this positive valuation. For example, what would the impact be of giving more headroom in the debt-monitoring/pari-passu metrics? 

We are unclear why the confidence level has reduced from the level in the 2020 valuation, which was described as being the limit of regulatory compliance. Nevertheless, we see this as a positive and reasonable change that the level has reduced to 70%/69%. We note this is still higher than that used in the 2017 valuation. 

Whilst we welcome the impact of the self-sufficiency measure being reviewed as part of the stability workstream, we question whether the definition of self-sufficiency — particularly the requirement to permanently maintain a high funding ratio — is fully explained and justified and would suggest that UUK requests modelling which explores the impact of this condition (especially the extent to which it drives the relationship between gilt rates and the surplus/deficit).

LUCU welcomes this response from Loughborough. It aligns with the important principles that our UCU pension negotiators are arguing for on our behalf: the need for the pension scheme to move away from excessive prudence in its valuation methodology, a return to pre-2022 benefits, the restoration of benefits lost since 2022, and as early as practicable.

However, there is one important area where, following guidance from our USS pension negotiators, we depart from management’s response, and this concerns the level of contribution rates. While Loughborough management remains open to higher contribution rates should they be needed to secure fair pensions, they remain unconvinced that the future risk of a deficit means that higher contributions from employers are needed at this time. Consequently, they favour a total contribution rate of 20.6%. UCU negotiators are clear that a 20.6% contribution rate risks the scheme falling into deficit within c. 3 years, and USS agrees with this. For this reason, UCU negotiators want employers to commit to a higher contribution rate of 26%.

Although Loughborough management would not choose to prioritise benefit reduction over making higher contributions should a deficit arise, it is important for members to consider that there are hard-line VCs who may adopt this position if presented with a pension deficit.  An overall contribution rate of 26% will ensure that the pension benefits we enjoyed before the cuts in 2022 can be restored and can be sustained in the longer term. Tremendous progress has been made on the pensions’ front thanks to members’ action, but we still don’t have a complete ‘win’ yet. We need to give our negotiators the backing to ask for higher contribution rates in order to ensure the sustainability of our pensions.  

Even in the face of the cost-of-living crisis, we urge members to support the higher rate of contribution when they respond to the USS consultation: this will help avoid the need to re-fight the same battles to protect the value of our pensions in just a few years’ time.  Though we too would be paying more into our pensions if the contribution rate is set at 26%, we would still be paying less into our pensions than we do currently and for much better benefits. 

Please feel free to share this communication with your colleagues who are not members of UCU, because it is vital that all members of USS are informed about the consultation and the importance of engaging with it.

Thank you,

LUCU Committee