The USS pension ‘deficit’ and the forthcoming survey of members

UCU University of Leeds Branch Posted on by

Text from email sent to members 21 April 2021

The USS pension scheme recently calculated that on a ‘best estimate’ basis, our pension scheme is £4bn in surplus.* ‘Best estimate’ (or ‘unbiased estimate’) means that this scenario is considered 50% likely to happen. The legal requirement for submitting a pension valuation, however, is that the calculations are done on a ‘prudent’ not ‘best estimate’ basis. ‘Prudent’, in this context, means more than 50% likely to happen. The £4bn surplus, then, is a starting point for those calculations, and the more ‘prudence’ is applied to them the lower the theoretical value of the scheme.

You will have heard of there being a significant deficit in the scheme, and it is likely that this has been represented to you as a fact, and probably without any reference to the ‘best estimate’ surplus. As a consequence of this narrated ‘deficit’, we are told, we must consider a possible reduction in our pension benefits – the amount we can rely on as income in retirement. 

This ‘deficit’ is the mathematical consequence of applying excessive prudence to that best estimate surplus. Some people will argue that the deficit is a result of factors such as increased longevity and market conditions, and yet the Superannuation Arrangements of the University of London pension scheme (SAUL) recently posted a surplus in their valuation, not a deficit. If a surplus/deficit was really only down to market conditions and demographic features, as some would have us believe, then SAUL too would have posted a deficit. But market conditions etc. are simply some of the ingredients in the calculation of a valuation. It is the recipe that is used that ultimately defines the valuation, and the management of assets and liabilities are very different in SAUL and USS. 

One of the key factors in a valuation, more so than longevity and market conditions, is a thing called the ‘discount rate’. This is because a valuation is not about whether there is an account currently in the red or black (in fact the USS assets are currently valued at £80bn, and less than £2bn is needed to be paid out annually, with more than £2bn coming in annually – the scheme remains cash-flow positive with growing assets). Instead, what a valuation does is ask if the current value of the assets matches the current size of all the future pensions that have been promised to date – yours and mine. Fundamentally that is a good question, though it is less crucial in an open and healthy scheme such as ours than in a closing or closed scheme. The ‘discount rate’ in effect is the amount by which you believe those assets will grow over time (because if you have a debt to pay long in the future, you don’t need to hold the full amount now if you can earn returns on it in the interim). As part of their excessively prudent approach, USS are suggesting that the assets will grow at around CPI + 0%, which is to say pretty much not at all – excessive prudence. That is a significantly dominant ingredient in their valuation recipe. Everything that you hear now about the ‘deficit’ has its origins here in decisions that USS make about the valuation. 

The university will soon be sending round a survey of members, and the UUK template we have seen is disappointing, steering toward a pooled acceptance of benefit detriment. The UCU hopes to work with the university to make meaningful adjustments to this survey before it goes out, but please look out for communications from us at the point at which it is released. 

Please alert colleagues in USS who are not UCU members to this post or forward the email on to them – we represent them too in matters of USS. 

Do come to the UCU General Meeting tomorrow, at which we are proposing a motion on USS. See Ben’s email of earlier this afternoon.

There is a national Defend USS meeting this Friday that you might wish to sign up for: http://bit.ly/PensionFightBack

Mark Taylor-Batty
Pensions representative, University of Leeds UCU

Note

*This figure is quoted in a First Actuarial note, quoting USS materials. First Actuarial themselves offer a ‘best estimate’ of £14bn surplus. The disparity is due to FA’s calculations being based on the actual assets that are held by USS, whereas USS calculates based on a theoretical model portfolio – another baked in aspect of prudence in any calculation of valuation.

Here are some recent links:

ABC of USS, jargon explained: https://www.leedsucu.org.uk/the-abc-of-uss-a-guide-to-the-jargon-that-surrounds-our-pension-scheme/

USS bite-sized: https://www.leedsucu.org.uk/uss-pensions-bite-sized/

The valuation: https://www.leedsucu.org.uk/the-uss-pension-scheme-2020-valuation/

The cost of opting out: https://www.leedsucu.org.uk/opting-out-of-the-uss-at-what-cost/

 A crisis in USS governance: https://www.hepi.ac.uk/2021/04/06/the-uss-trustees-governance-crisis/

Get involved with UCU Health and Safety!

UCU University of Leeds Branch Posted on by

The health and safety work of trade unions has been very important in the last year. As your branch Health and Safety Officer, I’ve been working to raise your concerns about the pandemic, improve guidance, inspect buildings and liaise with the other campus unions. I’ve spent many many hours in meetings to represent all our interests and improve safety for staff and students. All of us involved in safety on the union side feel this work has made a significant difference in improving the university’s approach, but we know there are still many concerns which continue to arise.

On a local level, some schools and departments have elected departmental health and safety reps. These have been crucial in discovering and acting on specific issues. If your part of the university doesn’t have an elected UCU H&S rep., would you consider taking this on? (You can check if your area has a rep at https://www.leedsucu.org.uk/about-us/departmental-representatives/). The role involves keeping an eye open for local health and safety issues, raising them with the local H&S team, representing UCU on your local health and safety committee, and liaising with the branch H&S Officer. UCU can provide optional training (which starts with a 3 day H&S course) and you are entitled by law to necessary time off for H&S duties.

The annual Workers Memorial Day is coming up on Wednesday 28th April. It’s a day when we commemorate those who have lost their lives at work, or from work-related injury or ill health. This year of course, we will particularly remember those workers who have died from COVID-19. So this year more than ever, it’s important to renew our H&S efforts, to organise collectively and to prevent work-related health issues. In our Leeds UCU branch, we want to mark the day by supporting more members to become local H&S reps.  And thus better ensure the health and safety of staff and students.

If you’re interested and would like to discuss this further, please email me.

Or if you decide now that you would like to stand as a local H&S rep, please email ucu@leeds.ac.uk expressing your willingness to stand. Then we’ll need two colleagues in your area who are UCU members to email ucu@leeds.ac.uk nominating you for the role.  If there are nominations for more than one person, there’s a possibility of job sharing or the committee will organise an election. 

The deadline for nominations is Monday 26th April.

Regards,

Neil Maughan

Leeds UCU Health and Safety Officer

UCU branch AGM

UCU University of Leeds Branch Posted on by

This post has been edited as the AGM date has been changed from 13 May to 20 May.

A reminder that UCU branch Annual General Meeting (AGM) will be at 3.45pm – 5pm on Thursday 20 May. The meeting will be on Zoom (link to follow nearer the time).

(Not to be confused with the general meeting this Thursday lunchtime that I emailed about yesterday.)

Traditionally we all have tea and coffee and cake from 3.30pm before the AGM, and we’re still going to do that, but you’ll need to provide your own tea and cake!

The deadline for motions to the AGM is 12pm on Tuesday 27 April. Please email any motions to ucu@leeds.ac.uk.

Nominations for the branch committee for the next academic year need to be with the branch administrator by the end of Wednesday 19 May (the day before the AGM).

There is lots of information on the website about standing for the branch committee, including the different roles, the nominations process and the importance of ensuring the committee is representative of the whole membership. Ben Plumpton has offered to have a chat with anyone who is thinking of standing and would like to know more, and I’m happy to do that as well (as are probably all of this year’s committee members).

UKRI/ODA Funding Cuts

UCU University of Leeds Branch Posted on by

From email sent to members 16 April 2021

You’ll have seen from the General Meeting agenda circulated yesterday that we’ll be discussing a motion about the UK Research and Innovation Official Development Assistance funding cuts at our branch meeting next week, to go forward to the union’s Higher Education Committee.

Before then, your UCU committee would like to find out more about who is affected and what’s happening on the ground so that we can better support members and campaign against these cuts. We have set up a special meeting for UCU members about this next Tuesday, 20th April, from 1-2 pm on Teams (see email for link).

Locally, your branch negotiators have raised serious concerns with management, and we received an update from the deputy vice-chancellor for research, at the Organisational Change Group meeting this Monday. The timescales that the government have imposed for this have been incredibly tight, and we know that universities must respond to UKRI by today (16th April) with their proposals.  We understand that 16 major projects at Leeds are affected, many involving international partners, and at various stages.  The DVC told us that replacement funding had been found for about half of the cuts but there is still a significant shortfall. We argued, and will continue to argue, that the university should cover this shortfall from reserves and honour all staff contracts.

If this affects you, please come to Tuesday’s meeting.  If you can’t make that time, please let us know by email to ucu@leeds.ac.uk what’s happening in your area.

Also, if you signed the Open Letter about this you will have received an update from the letter organisers on Monday, about the publicity they have generated and the lack of response from UK government, and encouraging you to write to your MP.  Please do – I have attached their template letter but please add examples and personal insights.  They are hopeful that creating sufficient pressure can prevent further cuts next year. You can find your MP and write to them via https://www.theyworkforyou.com/mps/

Best wishes,

Tim

Tim Goodall
Branch Secretary, University of Leeds UCU

USS pensions – bite-sized

UCU University of Leeds Branch Posted on by

The University has undertaken a series of ‘town hall’ meetings on the matter of the pension, and the VC is currently going around Schools to discuss the matter in smaller groups. We offer here some bite-sized notes, from questions that have come to Leeds UCU, or which have arisen in such meetings.

Is the pension I have built up to date under threat?

No, absolutely not. By law, everything that you have accrued to date so far should be paid to you on the terms that were in effect at the time of contribution. So, for example, if you were paying in to the pension before 2016, then you still have a ‘final salary’ part of your pension that was calculated at point of the closure of that part of the scheme, and is growing in relation to inflation each year and will be paid out as part of your pension package in retirement, alongside the Career Average part that you have been accruing since. As with the switch from final salary to career average, any change to the structure of the benefit calculation that results from a valuation will take effect from a given future date. 

Is the USS really in deficit?

Yes and No. If someone told you that Harry Potter really existed, you would think they were having trouble with reality, but you would have no difficulty agreeing that the character of Harry Potter existed. The deficit is a narrative too, a construction based on a set of real-world characteristics, but made up of a series of guesses about the future. By far the most significant one of these is the ‘discount rate’, which is the rate by which you might safely assume the contributions that we and employers pay will grow over time to cover the promise of the defined benefit pension. The USS have set this rate at something close to what they themselves admit has something like 1 in ten odds of happening: or in other words, they believe that there is a 9 in 10 chance of those assets growing much higher than that, but they won’t use those higher probabilities in the calculation of the deficit. What is more, the starting point from which future growth is calculated was set at 31 march 2021, which is to say right in the middle of an anomalous drop in the assets of the value as the Covid impacts upon the markets were hardest. As a consequence of this, the schemes assets are not predicted to reach £80bn in value until the early 22nd century, and yet that is precisely what they are worth today. This is why the UCU refer to these calculations as ‘excessively prudent’, or ‘recklessly prudent’. There are of course other factors that are used in these calculations: estimations of salary growth, estimations of longevity and so on. 

As for the current health of the scheme, leaving aside speculation of the future and looking at what is currently materially ‘in the bank’, then there is no evident deficit. The money coming in to the scheme from contributions has always more than covered the money going out of the scheme in benefits; the assets of the scheme have grown to £80bn value in recent weeks, which is the equivalent of forty years of paying pensions out at their current size (in the last USS report, just under £2bn annually). 

What does the surplus posted in the SAUL pension scheme tell us about the USS deficit?

The Superannuation Arrangements of the University of London (SAUL) pension scheme is the scheme that is most closely analogous with USS. It is a CARE Defined Benefit scheme. It has a similar demographic of membership. Recently, it posted a surplus in its 2020 valuation. So what this very plainly tells us is that the USS deficit has not been caused by market conditions, and has not been significantly impacted by the longevity of the demographic, nor any other aspect that is pertinent to our scheme. Anybody who claims these things now either simply does not understand how valuations are constructed or, worse, is trying to deceive you or deflect your attention from the core issue: the deficit is caused by the manner in which USS manages its assets and liabilities, and the manner in which it chooses to conduct its valuations. It is not the ingredients, it is the recipe.

How are UUK proposing to fix the ‘deficit’ and how does this compare to their past proposals that caused the 2018 USS strikes?

At the time of writing, April 2021, the UUK are consulting with employers on a proposal to reduce the Defined Benefit portion of our pensions, reduce accrual (you have to pay in for longer to gain the same benefits) and capping CPI revaluation (if inflation goes over above the set cap, the pension no longer increases in line with that inflation). This is broadly similar to what was being proposed, and rejected by members, in March 2018. Significantly, the rush to push through such a change before the scheduled increases to contributions in October 2021 implies that they are seeking to slash the value of our pensions by about 25% in order to prevent a 2.6% rise in employer contributions. Jo Grady has written to all members on this issue recently.

What are UCU proposing?

UCU have set out clear principles: Progressive contribution structures to enable low paid staff to join and stay in USS (which might involve, but is not limited to, conditional indexation of benefits, see next para); An end to the movement over the last decade to contribution increases and benefit cuts; A pension fund with more return-seeking investments, and ethical investments; Commitments from employers to 1.) covenant support 2.) USS governance reform 3.) lobbying for regulatory change.

Conditional Indexation: UCU, via their Superannuation Working Group (SWG), are also exploring the potential of restructuring benefits using Conditional Indexation. One key virtue of CI is that it would undermine the pull of over-prudence in valuations, and consequently could bring contributions down for all parties, possibly to 8% for employees. SWG would only recommend a form of CI that would be welcome to and of advantage to members. UUK are also exploring this and have been briefed on it. It is a system that would fit with what is expected of the scheme by the Pension Regulator. Because it implies a reliance on growth assets, it would remove the drive within USS to ‘de-risk’ the assets, which is one of the ingredients that lead to a deficit. As a consequence, a solution of this form could be an end to the cycle of deficit/reform/dispute. Conditional Indexation involves making the inflation-related increase on accrued pensions conditional upon the performance of the assets, and as such it represents a removal of guaranteed increases in value, but there are means of structuring such a scheme that compensates for the deflation in years of poor performance.

Should I consider opting out of the scheme?

We cannot give financial advice. For every £100 you contribute to the scheme, before tax, the employer contributes £200. The decision to opt out, then, is a conversation to have with your future self and family about whether you should take that net loss. Calculate what 21.1% of your current gross salary is (this is what your employer is currently paying into your deferred salary, your pension). Ask your future self if you should turn that sum down (and all its assumed growth) from your pension pot in order to retain 9.1% of your salary now. This also about the loss of the life assurance and other benefits that come with membership of the scheme. We have written an article on this matter here. We recognise that the potential increase of contributions to 11% this October will put a strain on members in their take-home pay, which is all the more reason to begin to get active on this issue now.

If the USS wanted deliberately to close the scheme, one thing they might do is find a means to increase the contributions to such a level that a significant number of members might consider opting-out.

What’s wrong with a Defined Contribution pension?

That depends on how well it performs. As the name indicates, the only thing that is known, defined, about a DC pension is how much you pay in; your contributions. You have no idea what you will earn in retirement from it as that will depend on how well the assets are managed by the pension scheme over the time until your retirement. It therefore does not offer the security of a defined benefit scheme such as the one we have as the majority part of our hybrid scheme, which, by contrast is one that tells you exactly how much you will get as a regular salary in retirement. 

What is the difference between a DB and a DC pension in terms of inter-generational unfairness?

Firstly, any change to the pension benefit that is worse that what is currently being offered is inter-generationally unfair. The most logical way to fight for inter-generational fairness is to try to maintain the current level of benefits, so that future generations get the same as past generations. Anyone who argues for changes to the scheme that downgrade the benefits is not arguing for inter-generational fairness, though often they use that argument as a shield for their proposals. 

What is the difference between a DB and a DC pension in terms of pay inequality?

Both DC and DB, sadly, hard-wire pay inequality; gender or race pay inequality means that the gap that is manifest in your pay packet is also manifest in your pension later in life, because your and the employer’s contribution to your future pension is a given percentage of your gross salary. This is one reason why UCU often state that fighting for fair pensions is a part of the broader fight for equal pay, and why we link campaigning for equality, and against casualisation, with campaigning to stop pension changes. Arguably, defined contribution pensions are even worse in manifesting gender and race pay inequality because the sum that is accrued in a DC pension will grow at a given percentage over time, and the smaller the amount invested, the slower and smaller that accumulative growth. This is then compounded in retirement when you have to use that invested amount to buy an annuity to create a regular income. 

 If USS members are unhappy with what the USS trustees are proposing, do we have a means of electing different trustees to better represent our interests?

No. The scheme offers very little in the way of accountability to stakeholders. Read more here.

What kind of pension do our colleagues in post-92 institutions have?

The post-92 sector pays into the Teachers’ Pension Scheme (TPS), offering a Defined Benefit (career average) pension. Contribution rates are tapered, from 7.4% for salaries up to £28,169 to 11.7% for salaries above £81,255. It is a public sector scheme, unlike USS which is a private scheme.  We suspect that if detrimental changes are imposed for the USS Scheme, there will be pressure to do the same to TPS, and similarly for local pension schemes for support staff.

UCU writes to government to call in airport expansion application

UCU University of Leeds Branch Posted on by

Following the decision of members on 10 March to oppose Leeds City Council’s airport expansion decision, branch president Ben Plumpton has written to the secretary of state for housing, communities and local government Robert Jenrick MP calling on the government to call in (review) the planning application for the expansion of Leeds Bradford Airport and hold a public enquiry.

The planning application to expand Leeds Bradford Airport, from 4 million passengers per year to 7 million, was approved by Leeds City Council’s plans panel on 11 March. The council has now referred the decision to government to consider the impact on the greenbelt, but UCU members want the decision to be called-in and for a public inquiry.

Dr Jennifer Fletcher, a senior research scientist in atmospheric and climate science at the university, who co-chairs the UCU branch climate and ecological emergency working group, said: “Expanding airports is incompatible with bringing down our soaring carbon emissions. It is vital that Robert Jenrick calls in this airport decision, as he did with the similarly controversial coal mine in Cumbria. As we recover from Covid-19, we need to increase healthy, green, well-protected jobs – not the sort of jobs associated with aviation.”

The branch motion and letter to Robert Jenrick follow an open letter from 246 staff and postgraduate researchers from the University of Leeds sent on 19 March.

Next general meeting reminder

UCU University of Leeds Branch Posted on by

The next UCU general meeting (meetings for all members) is scheduled for 1pm – 2pm, Thursday 22 April

The deadline for motions is 12pm on Tuesday 13 April.

(See the branch website for details of all the scheduled general meetings for this academic year)

The 22 April general meeting is also the chance to propose amendments to other branch’s motions that they have submitted to UCU congress – those motions will be published early in April.

You can find out a bit more about turning your ideas into union policy at making UCU general meetings work better

The USS pension scheme 2020 valuation

UCU University of Leeds Branch Posted on by

Our pension scheme is yet again seemingly under attack by the people who are supposed to be looking after it. This time even the employers’ body Universities UK have made a public statement criticising the valuation.

If you want to know more about the USS pension scheme 2020 valuation, and why everyone wants them to stop trying to put the contributions up unnecessarily, here’s a video of branch pensions rep Mark Taylor-Batty’s fantastic presentation to the branch open meeting on pensions on 11 March 2021, with an update from UCU President Vicky Blake on the national situation.

Read more

UCU University of Leeds Branch statement on gendered and sexual violence

UCU University of Leeds Branch Posted on by

For too long women, transgender, gender non-binary people and children have faced the threat of male violence and have been subjected to this violence to a sickeningly disproportionate degree. The horrifying kidnap and murder of Sarah Everard and the appalling murder of Nicole Smallman and Bibaa Henry are the most recent examples of this plague endured for decades, centuries, millennia. As a union, we recognise that both the threat of and actual violence directed towards women, transgender, non-binary people and children from men can be exacerbated by intersectionalities that aggravate power imbalances towards the LGBT+, Black, ethnic minority and migrant communities. This was particularly evident in the lack of media coverage directed towards Nicole Smallman and Bibaa Henry’s murders in June 2020 and the police misconduct that ensued in the disturbing allegations that two serving Met Police officers took ‘selfies’ with their bodies.

We stand together in solidarity with Sarah Everard’s, Nicole Smallman’s and Bibaa Henry’s families and all affected by male violence. We make a stand for all women, transgender, non-binary people and children living in fear from male violence. We make a stand to demand equality for all.

In the UK, 97% of young women have experienced sexual harassment. This statistic is shocking, yet one that we tend to accept. The reporting of incidents of sexual harassment is consistently low – over 95% of women, girls and non-binary people did not report their experiences of sexual harassment in 2021. One in four LGBT+ people have experienced domestic violence and, despite suffering the same trauma as non-LGBT+ people, tend to be less likely to report these incidents due to the concerns around homophobia, biphobia and transphobia to be endured in speaking up. We make a stand in the face of these staggering figures to demand a change in the culture of acceptance of gendered male violence.

We take a stand against male violence in all its forms in all spaces – at work, home, online and in public. To turn the tide and promote equality we must confront this insidious discrimination which pervades our institutions and everyday life and allows its agents to defy justice.

In particular, we call on the Government to hold accountable the Metropolitan Police in their response to the Sarah Everard vigil this weekend in which protesters were subject to unjust force, restraint and state violence. Government must take a stand in driving out male violence and empower women, children and gender minorities by instilling confidence that they will seek to hold those who perform acts of gendered violence to account.

We stand in opposition to the Police, Crime, Sentencing and Courts Bill, whose passing would exacerbate the inequalities that Government should be seeking to dismantle in the wake of Sarah Everard’s murder. We call on Government to abandon the disproportionate control measures as outlined in the Bill, which would curtail freedom of expression and the fundamental right to protest.

We call on our members and the public to take a stand in opposition to women’s, children’s, transgender and gender non-binary peoples’ subjugation:

  1. Donate to gender-based anti-violence charities, such as Refuge, Women’s Aid, Galop and SARSVL.
  2. Sign the UCU NEC and members’ statement to end gender-based violence & defend the right to protest.
  3. Protect your freedom to protest by signing this petition in opposition to the Police, Crime, Sentencing and Courts Bill.
  4. Email your MP in defiance of the Police, Crime, Sentencing and Courts Bill.
  5. Join the White Ribbon campaign for men and boys who want to work against sexual violence.
  6. Follow advice on how to support women and be an ally in the face of oppression.

If you have been affected by male violence and the latest events surrounding Sarah Everard’s murder, we would encourage you to seek support:

Opting-out of the USS – at what cost?

UCU University of Leeds Branch Posted on by

This blog post is not intended and cannot be taken as financial advice. An individual should seek independent financial advice based on their own circumstances and objectives. 

One of the concerns that faces the USS pension is the number of eligible members who have opted out of the scheme. As the contribution levels have grown (they are currently now the same as for the TPS pension that is common in post-92 institutions)* some people have felt the need to opt out and retain that 9.6% of salary, and perhaps make alternative pension plans. With the contribution level planned currently to go up to 11% in October, and with the unhelpful noises being made about potential further increases in the pipeline as a consequence of the 2020 valuation, it is understandable that some people might query the level of contribution in terms of how it impacts on their take-home pay each month. 

In the 2020 Report and Accounts of the USS scheme, it was stated that 16% of eligible members had not joined or had opted out of the scheme. In 2015 that figure was 21%, with a dip to 12% in between. There were 147,137 active members of the scheme in 2015 and 204,753 in 2020.

Of course, from a collectivist point of view, there is a risk with people opting out, as that can put pressure on the pension fund to continue to maintain its commitments to pay out the pensions that have been accrued. The pension that you have earned to date is legally protected – you will get it as defined – but loss of income to the scheme puts some pressure on future pension commitments and contributes to that much critiqued deficit calculation (though of course it also removes liabilities from the picture).

From an individual point of view, this is really a conversation you need to have with your future self. There is one crucial issue to think about if you are considering opting out: for every £100 you contribute to the USS pension (before your salary is taxed), the employer contributes £200. If you opt out, you might get to keep that £100 (and get it taxed) but you are also losing that additional £200 of your salary that is being deferred to your retirement. To opt-out, then, is to turn down the additional 21.1% of salary (currently) every year of the employer’s contribution to your pension. It represents an immediate net-loss under the guise of a seeming immediate gain. If you find an alternative pension, you start with that £100 a month contribution (or rather £80, after it was taxed), instead of that £300. Assuming the reason you opted out was wanting to pay less to a pension, then it would be logical that you would in fact start again in a new pension paying in less than a third of what you were effectively doing in USS. This could have the obvious consequences of a.) very significantly shrinking the size of pension you and your family might later be able to rely on, and b.) increasing the age at which you might afford to retire. In coming to this decision, we would recommend that you seek independent financial advice that considers what age you would wish to retire and on what size pension. In recommending independent financial advice, we would note the scandal in recent years of people being advised to move out of Defined Benefit schemes and into Defined Contributions schemes, to their demonstrable loss but to fund managers’ gain. 

The USS is still predominantly a Defined Benefit scheme, and the bulk or all of your pension is in an ‘Income Builder’, as USS call it: the more years that you contribute to the scheme, the higher the guaranteed income in retirement. That means that you can plan forward to retirement with some certainty of the kind of income you might get from day one, for the rest of your life. If you choose to find an alternative pension solution, not only will you be starting with a third of your USS contributions, but you will no doubt be using a defined contribution method – a form of pension that only lets you know with any certainty how much you are paying in, not at all what you might get in retirement: the more money you put in over time does not necessarily guarantee a larger pension.

Even if you only stay in a job for short time, you get to keep the pension you earn during that time forever, and it grows in value with each year to retirement. You can even hold multiple pension pots that you can draw on when you retire (or later consolidate them). Just a year or so of a Defined Benefit pension locked away when you are younger could be worth more than several years of Defined Contribution pension contributions later. Regardless of what changes are made to the pension scheme in the future, what you lock in now stays locked in on the current terms, and cannot legally be taken away from you or retrospectively downgraded.

The gender pay-gap and pension pay-gap is important here. Contribution levels are of course based on earnings, so the gender pay gap means that women tend to contribute less to their pension, and so have a lower pension in retirement. Women also tend to live longer, so having less to retire on is something that has an impact across a number of years. While a defined benefit scheme mirrors the pay gap in retirement, a defined contribution scheme is worse and amplifies that gap, due to the cumulative nature of investment growth – the size of the gap increases over time within the pension pot, assuming default investment choices.

The ill-health support and life cover that comes with contributing to a USS pension are also important factors to consider in any decision to opt-out of such ongoing benefits.

Of course, the recent behaviour of the USS in relation to valuations can be argued to be causing a kind of self-fulfilling prophecy. By constructing fictional deficits with ‘excessively prudent’ assumptions about the future growth of salaries, or of the scheme’s assets, they suggest that more is needed to pay in to the scheme, which puts off people, causes opt-outs, which then put real pressure on the scheme’s affordability if opt-outs reach a certain level. This is not in any stakeholder’s interest.

*(Note – the TPS has a tiered set of contribution rates. 9.6% is the most common rate paid in that scheme currently)