The first material impact of the UCU’s success in the pension dispute will be felt by all USS members at the end of this month, in the form of a larger amount of take-home pay in their salaries as a consequence of the reduced pension contributions (down from 9.8% of salary to 6.1% of salary) resulting from negotiations. From April, our pension benefits will go back up to where they were before the April 2022 cuts.

At yesterday’s General Meeting of UCU, we voted to endorse a proposal that members might use some of the increase in take home pay to contribute to the branch’s hardship fund, or even set up a standing order to it. This is a fund that helps support members whose pay was docked for taking the strike action that has won this pension income back for all USS members, regardless of UCU membership. We therefore would encourage your sharing this email and this recommendation with non-UCU USS members. Remember: we were proven right to strike over USS, and lost pay for doing so. For those who wish to make a one-off contribution or set up a standing order to the UCU University of Leeds branch hardship the details are: UCU Leeds LA29Hardship Fund, Unity Trust Bank, Account Number: 20391511, Sort Code: 60-83-01, or contact Leeds UCU’s branch treasurer, Nigel Bubb, at UCUhardship@lists.leeds.ac.uk

Another element of the negotiated win is that, by way of compensation for the reduced defined benefits accrued between April 2022 and March 2024, all members who were active in the scheme between those dates will get a one-off additional £215 added to their annual pension income calculation implying a further £645 to their lump sum at retirement (and these figures increasing against inflation each year until retirement). You can see what the impact of the changes are for you in a spreadsheet I have constructed here: 

While the extra take-home pay will be universally welcome, some colleagues may nonetheless wish to plan for the impacts this might have on their tax status. 

There are four scenario that might impact on colleagues in this or the following tax year. 

a.) tax banding

b.) high income tax benefit charge (for those receiving child benefit).

c.) parental contribution toward supporting children in higher education

d.) the Lifetime Allowance (LTA)

The premise here is that the welcome adjustment to our USS contributions from 9.8% of salary to 6.1% of salary from January could have tax-related impacts that some members might want to plan for. Because your pension contributions are taken before tax, when we see them reduced them to 6.1% in and from the January salary payment, that will marginally increase the envelope of salary exposed to income tax. Below my signature, I give more detail on the four scenarios outlined above. 

p.s. some of you may have seen that the factors USS use to adjust early or late retirement calculations have been adjusted, and these changes will take place from April 2024. UCU are querying some of these changes. In brief, they benefit those who retire later than their ‘normal pension age’ but those who retire early after 1 April might expect a bigger reduction in pension income than the current factors would produce. I’m happy to take queries on this.

Professor Mark Taylor-Batty

Programme Leader QW34
Translator and editor – Antonin Artaud’s The Theatre and Its Double
Project leader – Harold Pinter: Histories & Legacies
Series Editor – Methuen Drama Engage
National USS negotiator for UCU
My campus
X – @cupofassam

Details of the four given scenarios

a.) Tax banding. The first point for some to consider is whether or not this reduction might push some of you over the threshold from the 20% tax bracket to the 40% tax bracket (or different Scottish thresholds where they may apply). This isn’t going to impact on many colleagues, but those it will impact on might not yet be aware that it could be about to happen, starting either in this tax year, or in the next. In the 2023/2024 tax year the higher rate 40% tax threshold starts at £50,271 in the UK outside Scotland. So, if your 9.8% contribution was keeping your pay below this amount, and the 6.1% might tip you over, you might want to prepare, or consider means of increasing pre-tax deductions (AVCs, etc.).

b.) The High Income Tax Benefit Charge can hit families as something of a surprise, especially where it is discovered and applied retrospectively. This is for those who get child benefit. If one parent or guardian in the family has adjusted net income over £50,000, then a charge can apply (effectively the recouping of ‘overpaid’ child benefit). You can run the government calculator here. 

c.) The parental contribution toward supporting children in higher education is an implicit cost, whereby parents are expected to top up maintenance loans in families with household incomes above £25,000. There are different thresholds currently in £5k increments that dictate how much less of a maintenance loan a student might get, and therefore how much more is expected to be given in parental/guardian support. The calculation is based on gross household income minus any payments to pensions, so the reduction in pension contributions might cause an increase in expected financial support for your kids in HE. 

d.) Finally, an issue that very few well remunerated members might have is the risk of going over your Lifetime allowance (LTA). This is the maximum amount of pension benefits you can build up before having to pay additional tax (additional, that is, on top of the income tax you will pay on your monthly pension income in retirement). So, if you seek to mitigate a.), b.) or c.) above with making additional voluntary contributions to your pension, you may need to consider how this impacts on the rate at which you incrementally approach your LTA. That said, the chancellor’s autumn statement confirmed that the LTA was to be abolished from April 2024, so this matter is really only of interest to a very small handful of people who might yet be impacted in this tax year. (The Labour Party has committed to restoring the LTA should it win the next general election, as it is an example of progressive taxation, and so it might be prudent still to plan for the eventuality if you are in that fortunate position of needing to consider the LTA). All members will find their own calculation of how close you are to the LTA with your current benefits on the third page of your 2023 USS statement. The LTA figure USS gives you there will include the DC in the ‘Investment Builder’ but will not include any MPAVC amount in the Prudential, if you have any (even though, curiously, they will list that amount elsewhere in the statement). The amount you have used of your LTA is usually calculated by taking your current accrued benefits expressed as an income in retirement and a lump sum. Multiply the given pension income figure in your statement by 20 and add the lump sum. Then add any other pension benefits such as the value of your DC pot, and/or your Prudential MPAVC, or accrued pension in other schemes. The maximum pension savings allowed before additional taxation is £1,073,100, so for most of us this is never going to be an issue. There used to be a charge for going over your LTA amount, but the government removed this in April 2023. More details here. It’s hard to plan forward, but what you have in your statement this year will increase by September’s CPI figure (subject to the soft cap) for next year, and have next year’s contributions added. Hence needing to be alert to the incremental approach. But, as said, this is an issue for only a few people in a comfortable enough position to handle it, and we don’t yet know if the LTA will be resumed after 2024. So, for example, if you had no DC and no other pension savings, you are only going to breach the current LTA with an accrued pension of I calculate £46,700. A nice problem to have. You will find your calculation of how close/far you are to/from the LTA on page 3 of your USS 2023 statement.

None of the above is intended as, or should be taken as, financial advice. 

This page was last updated on 15 February 2024