USS valuation 2017

Frequently Asked Questions


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Defined contribution (DC) pensions build up an individual savings “pot” which is made up of both the members and employers contributions and returns on the investments. The fund value you might get from a DC scheme at retirement will be based on  the amount you and the employer pay in and the fund’s investment performance. You do not have to take the “pot” as a cash payment; you will have various choices  at retirement to use the funds as best suits your needs at that time. 

Every three years USS is required to carry out an actuarial valuation. During a valuation, the USS trustee assesses the fund’s assets and liabilities to ensure it has sufficient funds to pay the pensions already earned, and also that contributions into the scheme cover the cost of the planned future service benefits.

The valuation has a timescale from start to completion set out by the Pensions Regulator – the timescale is 15 months which means that the USS 2017 valuation needs to be submitted to the regulator within that timescale. 

The last two USS valuations (2011 and 2014) have been challenging. Both valuations revealed a funding deficit and rise in the cost of future service benefits. In 2014, UUK (who represent the employers such as the University of Exeter) and member representatives (UCU) agreed a package of reform to address these funding challenges. As part of the reform, both members and employers agreed to pay more towards USS and changes were introduced to benefits from April 2016. USS became a hybrid scheme, offering defined benefits (currently on salary up to £57,216.50) through the USS Retirement Income Builder and defined contribution-type benefits on salary above the threshold through the USS Investment Builder.

Since the 2014 valuation, economic conditions for defined benefit pensions have worsened. As a result, the position at the 2017 valuation is much more difficult than expected. The greatest challenge at this valuation is the significant rise in the cost of future service benefits, which has risen by over a third since the last valuation. The funding deficit has also increased to approximately £7.5bn (89% funded) on the assumptions adopted by the trustee. The deficit was £5.3bn (89% funded) in 2014 and the plan was to recover that deficit over a 17-year period.

Future service costs in USS have increased by more than a third since the last valuation. This is primarily due to the lower interest rate environment, and is associated with a further reduction in expected future investment returns. This is a problem faced by the vast majority of UK funded defined benefit schemes. The increased cost of making new defined benefit promises is one of the main financial challenges at this valuation.

The deficit at the valuation date (31 March 2017) is estimated at £7.5bn and is similarly driven by exceptionally challenging economic conditions.

In 2014, UUK, after consultation with employers, agreed a recovery plan to wipe out the deficit over 17 years through deficit recovery contributions paid by USS employers from 1 April 2016 (and some planned additional investment return). We did not expect the deficit to be fully addressed by March 2017 but the increased deficit is a sign of the higher level of risk involved in funding a much larger pension scheme by asset size than was predicted three years ago.

The valuation date is 31 March 2017 and the trustee is required to sign off the valuation and submit its report to the Pensions Regulator within 15 months of that date. The process began well before March 2017, with detailed and open dialogue between the trustee, UUK and UCU at all stages.

Since the initial findings of the Valuation there has continued to be discussions between the trustee, UUK and UCU and a joint panel of experts JEP has been established to review the valuation assumptions. The Trustee is still required to finalise the valuation and has missed the deadline date so is now taking steps to arrange for the valuation to be completed and agreed with the pensions regulator. These steps involve an increase in contribution levels – more details about this is in another FAQ.

The Pensions Regulator is the public body that protects workplace pensions in the UK. The Regulator’s powers are outlined in the 2004 Pensions Act. The Regulator must evaluate valuations once they have been concluded by the scheme trustees, and it therefore will need to find acceptable any outcome to the 2017 USS valuation. The USS trustee and UUK are engaged in dialogue with the Regulator to ensure it is aware of the progress on the valuation, and so that any concerns it has can be identified early on in the valuation process.

A sustainable solution to the funding challenges facing USS needs to be found. This has been clearly emphasised by the Pensions Regulator, who wrote to USS trustees and its stakeholders in September 2017 expressing concerns.

The USS trustee: is the formal body for the USS scheme they set the valuation technical terms and are responsible for establishing how much funding the scheme needs.

JNC: The Joint Negotiating Committee - has a vital role in the running of USS. The trustee establishes how much money needs to be paid for a particular level of benefits. If that contribution requirement is more or less than that currently being paid by members and employers, then it is the JNC who must decide how the cost of that increase shall be met – whether by changes to future benefits, future contributions, or both. The JNC is made up of equal numbers of representatives from UUK and UCU together with an independent chair.

UUK: They are the body who represent all employers participating in USS when making decisions about the scheme’s future. For more information about Universities UK (UUK), visit

UCU: is the body that employers negotiate any scheme changes with through the Joint Negotiating Committee For more information about the University and College Union, visit

In October 2016 USS became a hybrid scheme offering both Defined Benefits (DB) and Defined Contribution (DC) elements to the total benefit package.

The Defined Benefits element gives members a pension of 1/75 of your salary and a cash lump sum of 3/75 of your salary (up to a salary cap of currently £57,216.50) for each year of service. At the end of each year, your benefits for that year are calculated and added to previous years. This is then revalued every year in line with standard pension increases.

The Defined Contribution element is a fund that builds up made up of a total contribution of 20% of salary in excess of the salary cap (8% from the member and 12% from the employer) All contributions are invested and at retirement you can use the fund in a flexible way to provide benefits at retirement to suit your requirements such as pension or cash or income drawdown or an element of all of them.

The cost of providing the defined benefits (DB) component of the overall USS future service benefits has risen by over a third since the last valuation. This means that to maintain current benefits overall contributions towards USS would have to increase from 26% of salary presently to just over 37% of salaries, an increase of at least 11% of salaries. This increase would need to be shared under the USS Pension Sharing Costs rule between the employer and the employee.

The trustee requires the increased cost in future service benefits to be addressed at this valuation, and the Pensions Regulator and trustee will also need to agree a credible plan to address the deficit.

Employers believe that benefit reform is necessary to ensure the scheme is on a stable and sustainable footing for the long term. It is not in employers’ or members’ interests to increase cost or risk to an unsustainable level. Controlling cost and risk is important in order to ensure that accrued benefits are secure and to enable employers to continue to make high contributions towards future pension benefits.

Employers pay 18% of salaries towards USS. This is a high level of employer contribution and reflects a clear and continued commitment to offering high quality retirement benefits. However, employers are not in a position to increase their contribution further for a sustained period of time. Many USS employers are universities and registered charities operating on a not-for-profit basis. Most universities can't afford to pay more into pensions without diverting money from other central areas, such as teaching or research, reducing universities positive impact in the areas most central to their core mission and purpose. Increasing contributions could damage the high standards that students, research funders and others rightly expect, and could undermine the sustainability of some institutions.

Leaving the scheme with a 'wait and see' approach is not practical or appropriate, the valuation has to be finalised with details on the benefit structure, costs to employee and employer and the assumptions on investment returns, the Trustee must submit its report to the Pensions Regulator by 30 June 2018. Even if it was allowed, this approach would also constitute a multi-billion-pound gamble on the progress of the global economy over the next three years which could be catastrophic for the scheme and the university sector if assumptions were not borne out.

Any potential changes to member benefits or contributions are negotiated within the Joint Negotiating Committee (JNC), and once decided upon in the JNC any proposed changes will be subject to a full consultation with all affected employees. Any changes will be introduced once the valuation has been completed and signed off by the trustee and accepted by the pensions regulator so will not happen immediately.

Changes to the benefits could include reducing the salary threshold currently in place for the Defined Benefits Scheme, looking at using the full flexibility of the current defined contribution element of the current hybrid scheme to offer a market-leading defined contribution saving scheme to all employees, on all salaries.

UUK on behalf of the employers have suggested these changes as this is seen as the most effective way of managing USS risk, whilst simultaneously offering high quality benefits to employees and maximising options for the future, should the funding position materially change.

Benefits for past service are protected by law and cannot be changed retrospectively. So any benefits that you have in the USS scheme up to the change date will be based on the benefit formula before any changes are made – it is only your future benefits after any change date that will be on a new basis.

No, the overall amount employers have committed to pay towards USS benefits is 18% of salaries. This is unchanged. 

Until relatively recently the higher education sector offered final salary pension benefits to the vast majority of employees. However recent reforms have seen increasing divergence in the pension schemes offered in the higher education sector. Most have been reformed in one way or another, though the scale and shape of that reform would have depended on the specific circumstances and status of the different schemes.

Comparisons have been drawn between USS (predominantly for pre-92 institutions) and the Teachers Pensions Scheme (TPS) (for post-92 institutions, amongst others). However, this comparison is misleading, without recognising that the TPS is underwritten by the Government.

TPS is a statutory, unfunded scheme backed by the UK tax payer. In contrast, USS is a private sector (non-statutory) scheme directly backed by higher education institutions with a fund set aside (from employer and member contributions, plus investment return) to pay benefits. USS employers bear the risk that the fund is insufficient to deliver the promised benefits. An unfunded scheme is not reliant on investment performance (as is the case within USS) and greater risk can be taken as benefits are ultimately underwritten by the Government. TPS also has different valuation requirements and is not subject to the approach that the USS trustee must follow. Any comparison must reflect those significant differences in structure and regulatory requirements.

Member contributions only meet a proportion of the cost of current benefits. If the current level of defined benefits continued to be available this would constitute an additional cost of at least 11% of salaries (in addition to the current 8%). The University does not see a way in which employers or employees could afford that level of increase in cost, even if members could afford higher contributions to provide defined benefits, the benefits that could be provided may not be value for money and ultimately the benefits in USS are underwritten by employers and the risk exposure at the moment is too high.

No. USS is supported on a collective basis by over 350 employers that are committed to the scheme. The scheme is designed so that the risk being run by the USS trustee does not exceed the risk capacity of the sponsoring employers.

However, it is clear that the risk the USS trustee is running in the current economic environment is very high and that action must be taken to put scheme funding back onto a sustainable footing. This is why employers are proposing a reform of benefits in order to ensure the scheme is secure and sustainably funded, and to not put at risk the wish to provide excellent pension provision for employees for the long term. Universities can't afford to pay more into pensions without diverting money from other areas, such as teaching or research.

The JNC is responsible for deciding on changes to benefits and employee contributions to the scheme. If the JNC proposes benefit reform or changes to employee contributions there will be a statutory consultation between employers and affected staff. 

Further information is also available on the USS website.

The JEP (Joint Expert Panel) were established by the USS stakeholders, UUK and UCU under an agreement reached between UCU and UUK at the Advisory, Conciliation and Arbitration Service (ACAS) in March 2018, when agreement couldn’t be reached on the valuation assumptions and the initial results. The panel is made up of pensions industry experts, chosen by both UUK and UCU.  JEP is tasked with agreeing key principles to underpin the future approach (of the University and College Union (UCU) and Universities UK (UUK) to the USS valuation. A report from the JEP is expected in September 2018.


USS is the corporate trustee responsible for the management and administration of the scheme. Established in 1974, the trustee has its head office in Liverpool. The scheme is supervised in terms of its conduct of operations and financial reporting by the Pensions Regulator. The trustee, supported by its advisory committees, directs and controls the scheme to ensure that it continues to provide a valuable way for members to save for retirement. The trustee board delegates responsibility for day to day management of the scheme to the group executive. The rules, principles, practices and processes by which USS is governed are set out in the USS Governance Framework. There is more information on the USS Trustee webpages.