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Universities Superannuation Scheme
The Universities Superannuation Scheme is a pension scheme in the United Kingdom with £89.6 billion under management as of August 2021 (up from £67 billion in 2019). It has over 400,000 members, made up of active and retired academic and academic-related staff (including senior administrative staff) mostly from those universities established prior to 1992 (staff in the post-1992 universities are mostly members of the Teacher's Pension Scheme). In 2006, it was the second largest private pension scheme in the UK by fund size. The headquarters of Universities Superannuation Scheme Limited (USS) are in Liverpool.
In 1911 the President of the Board of Education established an Advisory Committee on University Grants. This research formed the basis of the predecessor of USS, the Federated Superannuation System for Universities, which was approved by the Board of Education and membership became compulsory for new appointees post 1 October 1913. The basic plan criteria were:
However, perceived drawbacks of the scheme were that it did not link to final pay, access was contingent on a medical examination, there was no guarantee for dependents, little provision for risk benefits, and no indexation of benefits. It compared unfavourably to the defined benefit scheme introduced for school teachers under the School Teachers (Superannuation) Act 1918. From 1958 to 1969 several committees were established to review the present arrangements. The recommendations for a defined benefit scheme were initially rejected by universities in 1960 and again by a committee in 1964, who concluded it was "unable to make a clear recommendation in favour of either system".
In 1969, a joint consultative committee (JCC) for the reform of FSSU was established, and commissioned a report from Geoffrey Heywood (the FSSU consulting actuary) that included a proposed outline for USS. It was to be a one-eightieth scheme with a three times annuity lump sum, available to new entrants only. No medical examination was required and pensions would not be increased.
A meeting to discuss the structure of USS took place in Liverpool on 28 December 1970. The proposal for an independent company was approved by the JCC in November 1971, and endorsed by the Committee of Vice-Chancellors and Principals in December 1971. The FSSU Executive Committee was "unenthusiastic". Drafting of the rules began in 1971, with the seventh draft being agreed in August 1973 and circulated to universities along with an explanatory booklet. The scheme was finally introduced on 1 April 1975. The scheme was a 'balance of cost' scheme in which the sponsors bear the risk of default, and specifically a 'last-man-standing multi-employer scheme', meaning that if an employer collapsed, the others would bear its responsibilities to its pensioners, such that 'default would require the bankruptcy of every institution, that is, the collapse of the UK university and research community'. Combined with extensive state funding of the higher education sector, this has been thought to make the risk of default very low. In the 2020s, the risk of stronger employers leaving the scheme lead to proposals for a moratorium on departures.
At the scheme's inception, contributions were 16% of salary, with employers paying 10%, and members paying 6% plus a 2% surcharge aimed at covering benefits for service prior to the scheme's inception. From 1983 to 1997, the employers' contribution rate increased to 18.55%. From January 1997 to September 2009 it decreased to 14%, and employee contribution reduced to 6.35%. The employer contribution was increased to 16% in October 2009.
The defined benefit of the scheme was to consist of a one-time cash lump sum of 3⁄80 of the final salary and an annual income of 1⁄80 of retiree's final salary, both multiplied by years of contributions. For purposes of calculation, the final salary was revalued each year in line with inflation.
From its inception, USS was the main pension scheme for UK academics and senior administrative staff of universities and similar higher-education or research institutions. This predominance was lessened, however, when the Further and Higher Education Act 1992 created numerous 'new universities', whose employees (old and new) remained in the state-run Teachers' Pension Scheme. From 10 December 1999, any employee of a UK higher education institution became eligible to join USS if they wished.
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Universities Superannuation Scheme
The Universities Superannuation Scheme is a pension scheme in the United Kingdom with £89.6 billion under management as of August 2021 (up from £67 billion in 2019). It has over 400,000 members, made up of active and retired academic and academic-related staff (including senior administrative staff) mostly from those universities established prior to 1992 (staff in the post-1992 universities are mostly members of the Teacher's Pension Scheme). In 2006, it was the second largest private pension scheme in the UK by fund size. The headquarters of Universities Superannuation Scheme Limited (USS) are in Liverpool.
In 1911 the President of the Board of Education established an Advisory Committee on University Grants. This research formed the basis of the predecessor of USS, the Federated Superannuation System for Universities, which was approved by the Board of Education and membership became compulsory for new appointees post 1 October 1913. The basic plan criteria were:
However, perceived drawbacks of the scheme were that it did not link to final pay, access was contingent on a medical examination, there was no guarantee for dependents, little provision for risk benefits, and no indexation of benefits. It compared unfavourably to the defined benefit scheme introduced for school teachers under the School Teachers (Superannuation) Act 1918. From 1958 to 1969 several committees were established to review the present arrangements. The recommendations for a defined benefit scheme were initially rejected by universities in 1960 and again by a committee in 1964, who concluded it was "unable to make a clear recommendation in favour of either system".
In 1969, a joint consultative committee (JCC) for the reform of FSSU was established, and commissioned a report from Geoffrey Heywood (the FSSU consulting actuary) that included a proposed outline for USS. It was to be a one-eightieth scheme with a three times annuity lump sum, available to new entrants only. No medical examination was required and pensions would not be increased.
A meeting to discuss the structure of USS took place in Liverpool on 28 December 1970. The proposal for an independent company was approved by the JCC in November 1971, and endorsed by the Committee of Vice-Chancellors and Principals in December 1971. The FSSU Executive Committee was "unenthusiastic". Drafting of the rules began in 1971, with the seventh draft being agreed in August 1973 and circulated to universities along with an explanatory booklet. The scheme was finally introduced on 1 April 1975. The scheme was a 'balance of cost' scheme in which the sponsors bear the risk of default, and specifically a 'last-man-standing multi-employer scheme', meaning that if an employer collapsed, the others would bear its responsibilities to its pensioners, such that 'default would require the bankruptcy of every institution, that is, the collapse of the UK university and research community'. Combined with extensive state funding of the higher education sector, this has been thought to make the risk of default very low. In the 2020s, the risk of stronger employers leaving the scheme lead to proposals for a moratorium on departures.
At the scheme's inception, contributions were 16% of salary, with employers paying 10%, and members paying 6% plus a 2% surcharge aimed at covering benefits for service prior to the scheme's inception. From 1983 to 1997, the employers' contribution rate increased to 18.55%. From January 1997 to September 2009 it decreased to 14%, and employee contribution reduced to 6.35%. The employer contribution was increased to 16% in October 2009.
The defined benefit of the scheme was to consist of a one-time cash lump sum of 3⁄80 of the final salary and an annual income of 1⁄80 of retiree's final salary, both multiplied by years of contributions. For purposes of calculation, the final salary was revalued each year in line with inflation.
From its inception, USS was the main pension scheme for UK academics and senior administrative staff of universities and similar higher-education or research institutions. This predominance was lessened, however, when the Further and Higher Education Act 1992 created numerous 'new universities', whose employees (old and new) remained in the state-run Teachers' Pension Scheme. From 10 December 1999, any employee of a UK higher education institution became eligible to join USS if they wished.