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Consultation on University Superannuation Scheme negotiating strategy

Consultation on University Superannuation Scheme negotiating strategy. Pensions Officer Bristol LA. Changes in October 2011. Existing USS members at 1 October 2011: Increase in Normal Pension Age to 65 (except if age > 55 on 1/10/11) With future increases linked to State Pension Age

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Consultation on University Superannuation Scheme negotiating strategy

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  1. Consultation on University Superannuation Scheme negotiating strategy Pensions OfficerBristol LA

  2. Changes in October 2011 • Existing USS members at 1 October 2011: • Increase in Normal Pension Age to 65 (except if age > 55 on 1/10/11) • With future increases linked to State Pension Age • Contribution rate up from 6.35% to 7.5% • Inflation cap for future accrual of pensions in payment/deferred • New members and re-joiners after > 30 months: • Inferior CRB (CARE) pension (de-risked, cheaper for employers) • Contribution rate 6.5% • All USS members • Cost sharing 65:35 if contribution rate forced up in future • Flexible retirement scheme – optional part-retired from age > 55 • Loss of redundancy protection (ERFC) for those age > 55 Note: Employers contribution left at 16%, probable aspiration to reduce.

  3. Dispute and negotiating history • October 2011 – changes imposed • February 2012 – dispute suspended • Negotiations to focus on comparability with other public sector schemes (especially Teacher’s Pension Scheme – TPS – in pre-92) • Redundancy protection (12 month extension and further joint review) • June 2012 – Congress votes return to work-to-contract • July 2012 – Redundancy protection to Oct 2014 ‘banked’ • September 2012 – Special Conference votes to re-suspend action and resume talks

  4. Negotiating environment (early 2012) • 92% funded (2011 triennial) • Recovery plan • Employers continue to pay 16% contribution for 6 years:3.4% above what is needed to meet cost of accruals • Then 4 years at 2% above estimated cost of accruals at that point • Estimated return on investments adjusted up by 0.51% to 6.61% • Government finalising proposals for public sector pensions • TPS and other settlements less draconian than that imposed on USS. Employer rate (16%) • BUFFER Estimated employer rate required to fund accruing liabilities (post CRB)

  5. Negotiating environment (now) • 81% funded (77% when action was re-suspended in Sept) • ‘Unintended’ consequences of stricter regulation and QE * • TPS changes ~final, actuarial work done – clearly better benefit! • Pressure on employers: sector anomaly, recruitment & retention • So not ‘dire’, but smaller buffer and employers are scared of ‘deficit’ and being asked for higher contributions at 2014 triennial Employer rate (16%) * Notional liabilities increased, but the scheme’s actual assets have improved and the cost of providing the pension promises has not changed. The 23% ‘deficit’ is the result of stricter methods in how pensions have to be accounted for - and if gilts where averaged over 20 years there would be no problem or underfunding.

  6. Consultation - what are your priorities? 1) Improvements to USS CRB section (already 239 in Bristol ~ 10%): • Broad comparability with TPS including • Better accrual rate • Better revaluation cap • Removal of inflation cap 2) Protection of favourable aspects of USS • Indefinite protection for final salary section • Desirable features of USS vs TPS • Lump sum • Death in service benefits • Redundancy protection • Lower contribution rates than TPS 3) Are you willing, if necessary, to pay additional contribution rates in order to secure improved benefits?

  7. Scheme designs * Ratios are employer:member ** Revaluation and caps for pensions in payment/deferred only - as CRB

  8. Contributions • Final salary – 7.5% (+ employer 16% = 23.5%) • USS CRB – 6.5% (+ employer 16% = 22.5%) • TPS – 6.4% to 12.4% (“unfunded”) TPS: Post 92 contributions against USS 6.5% for CRB members

  9. a = 20 yearsb = 30 years

  10. a = 20 years b = 30 years

  11. Overall picture * Cost to member: 1st = cheapest ** Factors-in contributions. Higher means better, on average, value for money (per unit member contribution)

  12. What are your priorities? • Improve CRB, make it more comparable to TPS? How? ** • Better accrual rate? • Better revaluation rate? • Removal of inflation cap? • Preserve favourable aspects of existing USS? Which? • Indefinite protection for the final salary section? • Lump sum? *** • Death in service benefit? * • Extend redundancy protection beyond 2014? *** • Lower contribution rates? • Are you willing if necessary***to pay additional contributions in order to secure improved benefits? If so: • By all, for all? (likely in the region of 1%-2%) ** • Or just for those who benefit? (CRB pay) • Tiered by salary? (more mildly than TPS?) ** * Probably the easiest to achieve ** Favoured in Branch Officer Meetings *** First explore capacity of USS to absorb, contemplate this only if objectively justified (TPS is ‘over-paying’)

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