News

USS Annual Report and Accounts

USS’s Annual Report and Accounts were published last week for the year ending 31 March 2017.  There has been some press coverage of the scheme, and it is important you understand the key facts:

  • Scheme funding levels (based on interest rates at 31 March 2017) remained stable at 83% in the year despite challenging economic conditions. They continue to be lower than the 89% level judged at the last formal valuation in 2014.
  • Strong absolute investment returns of over 20% in the year sees the scheme fund grow to over £60bn.
  • The absolute level of the funding shortfall would increase from £10bn (2016) to £12.6bn as at 31 March 2017, based on market interest rates on that day.
  • Relative to our investment performance benchmarks, the investment team added £1.1bn in value to the scheme over the last five years, making a substantial contribution to the funding position.
  • Scheme benefits changes agreed in 2015 were implemented during 2016, including increased member and employer contributions.
  • Major transformation of USS systems were successfully completed to deliver the scheme changes.

Scheme funding

The main reason for the growth in deficit is the large drop in long term interest rates in the year.  

You may have seen a larger deficit reported in the media recently of £17.5bn. That calculation is based on accounting rules and is not the figure that drives the benefit and contribution decisions for the scheme. It assumes the scheme’s assets are wholly invested in AA rated company loans. The scheme’s assets are invested in a diversified portfolio of equities and infrastructure, as well as government and corporate debt. The scheme’s investment strategy is to look to participate in the growth of the global economy to contribute to the cost of pension provision, but only to the extent that our sponsoring employers can make up the difference if growth is lower than anticipated.

The funding position deals in some large numbers, but the sector is large too. The payroll of contributing members is £8bn with £2.1bn in new contributions to the scheme every year. Over 350 employers back the scheme with total net assets exceeding £50bn. The position is within the affordable limits of the employers which has very close oversight, led by Universities UK. Members pensions earned to date are secure.

2017 valuation

The 2017 valuation is underway with a full review of all assumptions.  We plan to consult with employers on our proposed assumptions and the associated results in September. Initial analysis points to expected future investment returns being lower across all asset classes. This would lead to a rise in the expected cost of future pension benefits - for everyone in society whether your pension is with USS or not.  Universities Superannuation Scheme Limited, the trustee company, deals with these issues transparently and openly with its employer and member stakeholders. Decisions on the impact are ultimately taken by the Joint Negotiating Committee, made up of equal representations from employers and union with an independent chair, and fully consulted on with employers and members.

The trustee is keeping members informed through a dedicated section on its website https://www.uss.co.uk/how-uss-is-run/valuation

Investment performance and management

USS is a long term pension provider and investor for a long term sector.  We measure our performance over five years.  This is to allow the teams to take longer term positions that may not pay off over any single 12-month period. The teams are measured and rewarded on five-year targets, incentivised to make good decisions for the long term. Our returns have exceeded 12% per annum over the past five years, and in this period the teams have added £1.1bn of value to the scheme above market returns for equivalent asset classes. In the year to March 31 2017, performance was 2% below the benchmark, largely as a result of a short position versus our benchmark in UK government debt; this is not necessarily an indicator of poor long term performance.

It is crucial, particularly in times of economic uncertainty and reduced market outlook, that we can attract good-quality investment staff who are able to achieve such strong long-term results for the benefit of the scheme – but, for the fund management sector, we do not pay market leading rates.

The £1bn of added value achieved over the five years to March is net of investment management costs. We achieve such strong results at much lower costs than our peers – independent benchmarking says around £34m per annum cheaper – in part because we actively manage more than 70% of our assets in-house, rather than paying external management fees. Our goal is a diverse portfolio enjoying the benefits from global growth. On your behalf, we have invested in Heathrow, we own a port in Virginia, USA, and the toll roads and gas distribution networks in Spain; these investments have, generally, done very well for the scheme.  USS has the scale to make these investments at lower overall management costs than other organisations, and we look to ensure we have the talent necessary to manage these programmes.

We are confident that the breadth and diversity of assets and capabilities deployed for the scheme will continue to pay off over longer periods.

Summary

USS is run solely for the benefit of members and, in turn, their employer’s benefit. It is both a well-run and well-governed scheme that provides secure and very good value pensions.

Despite the difficult times in the global economy, it will continue to do so, with the backing of the sector's employers and the comprehensive skills and capabilities it has built up over many years.

USS are very happy to receive any of your comments and suggestions, which can be submitted through our website: https://www.uss.co.uk/public/contact-us

The website has the full report and accounts; comprehensive details of our governance structures, and information on the 2017 valuation. Members are encouraged to learn more about the scheme here, and form their own opinions on how USS has performed.

OSPS Consultation

The OSPS 2017 Consultation is now closed. You can find information about the outcome here:

The Finance Division arranged briefing sessions to tell members more about the proposed changes, and to answer any questions. These sessions have all taken place, but you can watch a video of the session here.

Downloads:

We've compiled a list of Frequently Asked Questions about the consultation, which we'll add to throughout the consultation period.

If you have general enquires about the scheme, you can email osps@admin.ox.ac.uk or call 01865 (6)16133 and talk to one of the Pensions team.

OSPS Annual Report and Accounts for year end 31 March 2016

The OSPS Annual Report and Accounts (for year to 31 March 2016) are now available. Copies can be downloaded from the OSPS Resources page. If you wish to obtain a printed copy, these can be requested by contacting the OSPS Pension team.

7 November 2016

Auto Enrolment update

To help people save more for retirement, all employers are required by law to assess their workers and automatically enrol those who are eligible into a workplace pension scheme.  If you opt out the University has a duty to re-enrol you every three years if you are eligible. It is the three year anniversary and the University will make an assessment in June 2016 (with an email reminder in May 2016) of employees who are not in a pension scheme. 

If you are not at present an active member of a workplace pension scheme, this may affect you.

We will automatically enrol you into a University pension scheme from 1 June if you:  

  • are aged  between 22 and the State Pension Age; and
  • work or usually work in the UK;  and
  • earn more than £10,000 a year (or £833 a month)

What if I do not wish to be a member of the University’s pension scheme?

If you are automatically enrolled but do not wish to be a member of the pension scheme you can choose to opt out. If, on the basis of the criteria outlined above, you can see that you will meet the criteria to be enrolled, you can opt out any time after 1 June but please note that the pensions regulations specify that we cannot accept forms dated or sent before 1 June.

In order to opt out, you need to complete a form which you will find on the relevant pension scheme website.   Completed forms should be returned to:

The Pensions Office

Finance Division
University of Oxford
6 Worcester St
Oxford OX1 6BX

or email a scanned copy of the completed form to: ox.autoenrolment@admin.ox.ac.uk

More information can be found on the auto-enrolment webpage.

Pension Office Change of Address

From 8 April, the University of Oxford's Pensions Office will be located at:

6 Worcester Street

Oxford

OX1 1BX

All other contact details remain the same.

USS Scheme changes

USS has announced the final form of changes to be made to USS benefits.  The new section of the scheme shall be introduced in phases from April 2016. 

Further information, can be found on the USS website.  

USS will issue monthly updates with details of relevant changes.  You can find all the USS Newsletters here.

1 April 2016

OSPS and Pension Flexibilities

The Government has recently announced a number of flexibilities regarding the way pension benefits can be paid. We have produced a guide showing how these affect the benefits offered by OSPS, entitled A guide to pension flexibility at retirement (146kb) .

24 November 2015

July 2015 Budget changes

The Budget on 8 July 2015 included changes to the Lifetime Allowance (LTA) and the Annual Allowance (AA). These changes may affect some pension scheme members with large pension savings or a large overall income (from all sources).

LTA changes

The Government will reduce the LTA for pension contributions from £1.25 million to £1 million from 6 April 2016. Transitional protection for pension rights already over £1 million is expected to be introduced although the details are not yet known. The LTA will be indexed annually in line with the consumer prices index (CPI) from 6 April 2018. For more information about the LTA visit the government lifetime allowance webpages.

AA changes

The Government is to restrict pension tax relief for high earners by introducing a tapered reduction in the amount of AA for individuals with income (including the value of any pension contributions) of over £150,000, and who have an income (excluding pension contributions) in excess of £110,000. This change will come into effect on 6 April 2016. For more information visit HMRC’s annual allowance pages.

Transitional rules will apply to protect pre-Budget pension savings from the impact of the changes, and to protect pension savings from retrospective tax charges, by providing generous transitional provisions.   Under these provisions, individuals will generally have an AA of between £40,000 to £80,000 inclusive (depending upon the amount of pension savings made the Budget date) for the 2015/16 tax year only.  From 2016/17 the AA will revert to £40,000.   

For further information about pension tax relief limits visit our pensions pages.

12 August 2015