UUK proposes 20-year moratorium for employers leaving USS

Universities UK (UUK) has proposed placing a 20-year moratorium on employers exiting the Universities Superannuation Scheme (USS) in order to strengthen covenant support.

The proposal, which emerged as part of a question and answer document published by UUK’s USS Employers website, is under consultation with employers alongside the introduction of further covenant support measures and a possible review of the scheme’s governance.

However, the organisation did state that it knew of no employer other than Trinity College Cambridge, which withdrew in 2019, that would look to exit the scheme, stating that the vast majority of the employers could not afford to buyout.

It stated that the USS Trustee “seemed prepared to impose damaging contribution requirements” on members and employers if covenant support measures were not agreed.

USS Employers explained that the 2020 valuation had revealed a further worsening of the scheme’s funding position, which meant additional contributions would be necessary to fund the benefits that have been accrued and to get the scheme funding back on track.

It said current benefits could not be met by current contribution levels within the regulations, which were in place to protect members, creating the need for changes.

The scheme must be made more appealing and inclusive of it risks members leaving due to high contribution levels, according to USS Employers.

The organisation, which is managed by Universities UK (UUK) and is intended to help employers to communicate with staff and students about USS, explained in a question and answer document that its parent organisation’s new consultation was intended to stimulate debate on how change could make the scheme appeal more.

It also stated that there was intergenerational unfairness within the scheme, as high contribution rates of 9.6 per cent were thought to be pricing out younger members from the defined benefit scheme.

Additionally, USS Employers said recent feedback from many employers and members was that current contribution levels were at “the limit of what they can afford”, with UUK asking employers to outline a “maximum affordable contribution rate” as part of the consultation.

The consultation was launched by UUK on 7 April and proposed an alternative path to the 2020 USS valuation which it has argued could help bring headline costs down.

Planned measures included the introduction of a flexible defined contribution segment for younger savers and decreasing the salary cap for the scheme from £60,000 a year to £40,000 a year.

    Share Story:

Recent Stories

Making it easier for smaller schemes to access bulk annuity pricing
Pensions Age editor, Laura Blows, speaks to Just DB business development manager, Pete Jennings, about how smaller schemes can access the bulk annuity market
Green investing
Laura Blows speaks to FTSE Russell, Head of Sustainable Investment Solutions, Lee Clements, about green investing, green revenue data and the EU Taxonomy