Universities Superannuation Fund

A UK industry model

Rotman ICPM / Netspar / Maastricht UniversityDiscussion Forum – October 2007

USS history and background

• Started in 1975, a DB scheme for academics

• Predecessor was the Federated Superannuation Scheme for

Universities (FSSU)

• FSSU had shortcomings

• Pressure grew for a DB solution, and parity with the Teachers’

Pension Scheme

USS overview

• 2nd largest pension scheme in the UK with assets of £30bn

and membership of 240,000

• Multi-employer scheme mutually funded by more than 330

universities

• Index-linked final salary with 50% pension after 40 years, plus

lump sum

• Employers meet the costs of providing benefits over and above

the employee contribution of 6.35% (currently 14% of salary)

• Exclusivity clause

USS legal structure

• A trust with a corporate trustee, USS Limited

• Directors of USS Ltd are responsible for the delivery of the

pension promise

• A separate body in the scheme structure is responsible for

negotiations on future benefit changes

• Structure recognises the importance of a clear division of

responsibilities

USS funding position: past and present

• Surpluses in 1980s & 1990s but no contribution holidays

• 2005 triennial valuation showed a funding level of 77%

• Inevitability of continued cost pressures

• 2006 proposal to charge individual universities for cost of early

retirement before 60 agreed

• 2006 proposal to raise retirement age to 65 rejected

• Next valuation in March 2008 will further clarify cost pressures

Forthcoming developments in the education sector

• Next sector pay negotiation is 2009

• Formation of the Employers’ Pension Forum during 2007 to

focus the cost of pensions into pay negotiations across the

sector

• UUK Hewitt consultation “Strategic Enquiry into the Pension

Arrangements for the Higher Education Sector” to conclude

early 2008

Where does this leave USS?