USS EMPLOYER CONSULTATION 2018 ussconsultation2018.co.uk

1. USS EMPLOYERCONSULTATION 2018www.ussconsultation2018.co.uk

2. THIS PRESENTATION COVERS: • Current contribution rates & benefits • The latest valuation (as at 31 March 2017) • What’s happened since (including the JEP) • Proposed contribution increases • How to respond to the consultation • Equality Impact Assessment

6. Further Benefits • Death in Service: beneficiaries receive three times your full salary as a lump sum; your spouse or civil partner receives a pension for life based on full pensionable salary • Death in retirement: spouse or civil partner receives half the pension you were entitled to when you retired, plus increases to reflect inflation • Ill-health: If you retire on ill health you receive a pension and a tax-free cash lump sum

7. Employer Contributions 18% of salary from employers • 13.3% - USS Retirement Income Builder • 2.1% - deficit recovery • 2.1% - USS Investment Builder • 0.1% - investment fee subsidy • 0.4% - towards the running of the Scheme

8. Member Contributions 8% of salary from members 8% of salary up to the salary threshold to the USS Retirement Income Builder 8% of salary above the salary threshold saved in the USS Investment Builder

10. The majority of feedback suggested the valuation was set at close to maximum risk appetite • Employers • UUK’s response indicated the Trustee should take a more moderate approach to risk • Scheme Actuary • Discount rate is at the upper end of the acceptable range for a “strong” covenant • The Pensions Regulator • Discount rate is at the upper end of what is acceptable, if the covenant is “strong” • Covenant adviser • The covenant is strong, but the Trustee should consider reducing risk

12. Contribution rate required = 37.4%

13. 11.4% higher than current combined contribution = c.£900m a year

14. Investment Performance v Outlook

15. USS Investments

17. Stakeholder engagement on the 2017 Valuation

18. Some options available Remove the employer contribution to the “match” Reduce the employer contribution to the investment builder for salary above the threshold Increase contribution rates

19. Initial Proposal The salary threshold would reduce to zero The “match” would be discontinued Option to reduce your contribution from 8% to 4% Employer contribution to the investment builder to increase to 13.25%

20. Milestones to completion & JEP Process

21. Proposed changes to USS from 1st April 2019

22. What member contributions fund

23. Proposed changes to USS from 1 April 2019

24. Joint Expert Panel (JEP) Review the methodology of the valuation Panel of 7; 3 elected by UCU, 3 elected by UUK and an independent chair approved by both First report published 13th September

25. Joint Expert Panel (JEP) Re-evaluate the employers’ attitude to risk, which would result in a re-evaluation of the reliance on the sponsor covenant. Adopt a greater consistency of approach between the 2014 and 2017 valuations, which affects the scale and timing of deficit recovery contributions.  Ensure fairness and equality between generations of scheme members by smoothing future service contributions. Ensure the valuation uses the most recently available information; e.g. taking account of recent market improvements, new investment considerations and the latest data on mortality.

26. Joint Expert Panel (JEP) Contributions required = 29.18% Employer contribution = 20.07% Employee contribution = 9.11%

27. How will USS respond? “There may well be areas where our opinion and understanding differs from that of the panel but we will want to reflect on the report in due course. The views of stakeholders will also be required before we can derive any conclusions.” https://www.uss.co.uk/how-uss-is-run/valuation/2017-valuation-updates/statement-on-the-joint-expert-panels-report

28. Any USS pension benefits you have already built up are protected by law

29. What questions will I be asked? Removal of the match As a first step in addressing the increased costs of the scheme, it is proposed that the employer match would be removed, which would have the effect of reducing the total combined contribution required from members and employers from 37.4% to 36.6%. Under the rules, the 1% paid by a member who elected to pay the match will continue (members can elect to stop this). If you want to respond to this point and/or suggest any changes to it, please comment. Any USS pension benefits you have already built up are protected by law

30. What questions will I be asked? Contributions above the salary threshold It is proposed that members earning above the salary threshold and their employers continue to contribute 20% (members: 8% employers: 12%) to the USS Investment Builder. The remaining elements of member and employer contributions would go towards supporting the USS Retirement Income Builder section of the scheme. If you want to respond to this point and/or suggest any changes to it, please comment. Any USS pension benefits you have already built up are protected by law

31. What questions will I be asked? Contributions shared 35:65 between members and employers respectively It is proposed that the required 10.6% increase in contributions be shared between members and employers at a ratio of 35:65 respectively. If you want to respond to this point and/or suggest any changes to it, please comment. Any USS pension benefits you have already built up are protected by law

32. What questions will I be asked? Increased contributions under the cost sharing rule Under the cost sharing rule, member contributions would increase to 11.7% of salary. The trustee proposes to phase this increase: to 8.8% from 1 April 2019; to 10.4% from 1 October 2019; and to 11.7% from 1 April 2020. If you want to respond to this point and/or suggest any changes to it, please comment. Any USS pension benefits you have already built up are protected by law

33. Any USS pension benefits you have already built up are protected by law

34. What is an Equality Impact Assessment ? • Systematic way of identifying the differential impact of a particular policy or process on protected characteristic groups. • Takes into account needs and experiences of different groups. • Informs mitigating/avoidance actions to influence future outcomes.

35. Protected Characteristics Age Disability Gender Reassignment Pregnancy & Maternity Race Religion or Belief Sex Sexual Orientation Marriage (& Civil Partnership)

36. Process Approach Define policy/practice Description of policy/practice Protected characteristic group implications Provision of conclusive evidence Nature of Impact: +ve, -ve or neutral Stakeholder consultation/involvement Outline of proposed changes Publish results Regular monitoring & review

37. Proposed USS Reforms DB section on salaries up to £57,216.50 increase to member contribution rates: 8.8%, 10.4%, 11.7% increase to employer contribution rates: 19.5%, 22.5%, 24.9% DC section above salary threshold of £57, 216.50 increase to member contribution (8%) employer contribution remains (12%) Matched contributions above and below the salary threshold 1% employer match discontinued

38. Potential Assessment Outcomes 1. Continue the proposal 2. Change the proposal 3. Justify and continue the proposal 4. Seek to abandon the proposed reforms to USS

39. Consultation Responses For further information and to respond to this consultation visit: www.ussconsultation2018.co.uk Key Contacts: Jim Ross: jim.ross@glasgow.ac.uk Christine Barr: hr-directors-office@glasgow.ac.uk

40. Questions? For further information and to respond to this consultation visit: www.ussconsultation2018.com #UofGWorldChangers @UofGlasgow