The Universities Superannuation Scheme (USS) has confirmed that its commutation factors will be updated from 1 October 2026. These factors are reviewed regularly and are an important part of how retirement benefits are calculated.
This change may affect members who are considering exchanging pension income for a lump sum, or vice versa, at retirement.
What are commutation factors?
Commutation factors are used by USS to determine the value when members choose to exchange:
- Part of their pension for a larger lump sum, or
- Part (or all) of their lump sum for a higher annual pension
These factors vary depending on your age and reflect the relative value of the benefits being exchanged.
You can read more about how these factors work on the USS website: https://www.uss.co.uk/for-members/calculate-your-benefits/factors-used-by-uss
Exchanging pension for a larger lump sum
If you choose to give up part of your Retirement Income Builder pension to receive a larger lump sum:
- USS multiplies the pension you give up by a commutation factor
- The factor depends on your age and the value of the pension being exchanged
From 1 October 2026, updated commutation factors will apply. Under the new factors, members may receive slightly less lump sum for the same amount of pension exchanged compared to the current rates.
Exchanging lump sum for additional pension
If you instead choose to exchange some or all of your lump sum for a higher annual pension:
- USS applies a reverse commutation factor
- The lump sum is divided by this factor to calculate the additional pension
- The factor depends on your age and the value of the pension being provided
Following the change on 1 October 2026, members may receive slightly more pension for a given lump sum than under the current arrangements.
What this means for you
These changes highlight the importance of considering the timing of your retirement decisions. Depending on your plans, the updated factors could affect the value of the benefits you receive when exchanging between pension and lump sum.
Members are encouraged to review their options carefully and consider how these changes may impact their retirement choices.
Further information and guidance
For more detail on USS commutation factors, visit: https://www.uss.co.uk/for-members/calculate-your-benefits/factors-used-by-uss
Please note that this article is provided for information only and does not constitute financial advice. If you are considering accessing your pension benefits, you should seek independent financial advice.
UCU members who wish to do so can access the services of Quilter Financial Advisers through the UCU partnership: https://www.ucu.org.uk/quilterfinancialadvice