Members of UK higher education’s biggest pension fund are set to pay lower contributions earlier than expected after employers and the University and College Union (UCU) agreed to speed up changes following a reversal of fortunes for the scheme.
The joint negotiating committee (JNC) for the Universities Superannuation Scheme (USS) – that includes representatives of Universities UK and UCU – has backed an accelerated timetable that will see both sides save significant sums from 1 January 2024, instead of 1 April, subject to final approvals.
From this date, members’ new contribution rate will be set at 6.1 per cent, down from 9.8 per cent currently. Employers will pay 14.5 per cent, down from 21.6 per cent. Changes that will see benefits restored to members in line with those received before the scheme was cut back in 2022 will not be implemented until April.
UCU has said previously that an average USS member will be between £150,000 and £200,000 better off through paying lower contributions across their working lives and enjoying better benefits in retirement.
The JNC has also backed a plan that will hand a one-off uplift to members who may have lost out on benefits or paid higher contributions since the changes were introduced. This will be worth £215 per annum and a £645 lump sum in retirement. Retired members will not get a lump sum because of tax rules but will receive a £241 annual boost to their pensions.
UCU has already brought its long-running pensions dispute to an end after its members overwhelmingly supported the plan but had been pushing for the changes to be sped up after a projected multibillion-pound deficit became a surplus in the three years between valuations in 2020 and 2023.
USS said it was now “taking steps” to implement the JNC’s decision, but it was subject to the results of consultations and the completion of the valuation documents.
A spokesperson said there was a “desire for the new, lower contribution rate arising from the scheme’s 2023 valuation to be introduced as soon as possible, and we are working hard on preparations to that end”.
Employers have been encouraged to plan and prepare for the new rates coming into effect from 1 January, they added, but members would receive an update in December once the process was complete.
Rocketing interest rates after a decade of stagnation have been credited for the improved finances of the scheme, but UCU has maintained that the cuts were never necessary.
USS has said it is taking steps to avoid future volatility after a tumultuous few years.