Latest Russell Group statement on the USS pension scheme

05 July 2021

Russell Group universities have today (5 July) published a statement on the Universities Superannuation Scheme in response to UUK’s second short consultation with employers.

The consultation is set to close later today and Russell Group universities will respond to it individually reflecting each institution’s circumstances.

The statement can be read below:

• The decision by USS to offer a revised package that is broadly in line with current contribution rates is a positive and welcome step and means USS members and employers are not saddled with unrealistically high payments.

• Now, we must work together rapidly to find a long-term solution that provides better value for money and does not place an unfair burden on future generations.

• Exploration of alternative scheme designs, along with an independent governance review of USS, must begin immediately to identify a range of options that could be implemented ahead of the next scheduled valuation as well as improvements to how the scheme is run.

• As part of efforts to find a sustainable solution and affordable benefits for staff, we agree to an enhanced covenant support measure where the metric trigger for pari-passu security would move to 10% of assets on secured future borrowing.

• We hope this agreement and recent significant improvements in the economy will allow the 0.5% increase in contributions proposed by USS to be reduced or eliminated as we work to seek a resolution to the 2020 valuation.

• Our determination to support our staff so they can enjoy their retirement is unchanged, as is our commitment to a hybrid scheme. We are not seeking to reduce what employers pay into pensions and we want more staff to be in the USS scheme so they can benefit from employer contributions. That is why the trustee must urgently prioritise the development of an additional low-cost alternative to give staff more options to stay in the scheme.

• We recognise this is a challenging situation for our staff. We are working hard to find a solution that will provide a decent pension without contributions that are constantly increasing.

• Our view remains that a pension scheme backed by a contribution rate of 30.7 per cent shared between employers and employees should be sufficient to provide a stable, comfortable income in retirement.

• If, on the other hand, contribution rates continue to rise, more individuals will probably choose to leave the scheme and lose out on valuable employer contributions to their future retirement.

Further Information

Failure to resolve the 2020 valuation would, according to USS calculations, lead to significant increases in both employee and employer contributions: employee contributions would rise to between 13.6% and 18.6% (from 9.6% now), and employer contributions would rise to between 28.5% and 36.7% (from 21.1% now), depending on agreements being reached on other covenant support measures to be put in place.

The mission of Russell Group universities is to provide high quality teaching, deliver world class research and the best experience for our students and staff. However should pension contributions continue to rise employers will face increasingly difficult choices to balance those missions against ever-increasing contributions.

When considering future options for the scheme, Russell Group universities believe the Trustee must provide a range of options to ensure the scheme’s offers are affordable and attractive to all staff at all stages of their career.