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Universities Superannuation Scheme

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If you have ever contributed to USS or are drawing a pension then read this! I think it could cause mass industrial action if it goes through.

Point "G)" is particularly insidious, because in the USS, people often work for a few years after doing a PhD., then leave to another career or another country. Those benefits were inflation protected to some degree by being linked to RPI. This has changed to CPI but crucially now is capped at 2.5%.

The difference between (fudged) CPI and 2.5% compounded (over, say 30 years) during a period of even modest inflation could rob you ENTIRELY of inflation protection; you will retire with a worthless pot.

http://www.uss.co.uk/news/Pages/StatementfromUSS.aspx

F) Pension increases (for pensions in payment) will be inflation proofed in line with increases in the Consumer Prices Index (CPI) subject to a 5% inflationary cap.

G) Pensions in deferment will be increased by CPI or 2.5%, whichever is the lower.

I have always said to myself that pensions will be worthless by the time I retire, but now I see the mechanism they intend to make it worthless by.

I guess this means I need more inflation protection. :angry::unsure:

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If you have ever contributed to USS or are drawing a pension then read this! I think it could cause mass industrial action if it goes through.

Point "G)" is particularly insidious, because in the USS, people often work for a few years after doing a PhD., then leave to another career or another country. Those benefits were inflation protected to some degree by being linked to RPI. This has changed to CPI but crucially now is capped at 2.5%.

The difference between (fudged) CPI and 2.5% compounded (over, say 30 years) during a period of even modest inflation could rob you ENTIRELY of inflation protection; you will retire with a worthless pot.

http://www.uss.co.uk/news/Pages/StatementfromUSS.aspx

I have always said to myself that pensions will be worthless by the time I retire, but now I see the mechanism they intend to make it worthless by.

I guess this means I need more inflation protection. :angry::unsure:

You are not alone :P

All UK private pensions will have its index link changed from PRI to CPI soon.

Buy UK index-linked long gilt or index-linked gilt pension http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=VSF65&univ=U&pagetype=pension

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This will be particularly detrimental to women (and men) who take a child break. Family friendly policy heh?

Cut and cheesepare, we will be left with a society which favours those with inherited wealth at the cost of everyone else.

:angry: :angry:

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It will also discourage people from leaving the profession (e.g. moving from the public to the private sector), encourage those who have to leave (e.g. who are made redundant) to pursue their former employers through the courts for money (because their USS pensions will be worth a lot less, proportionally for their USS-contributing years, than if they'd stayed in academia until retirement age), and encourage those who are planning some but not all of their careers in academia to opt out of USS contributions.

Another regular on this board already posted on another thread that she has opted out of USS contributions altogether, despite the HR department of her institution trying to make it as difficult as possible for her to do so, because she's on a typical postdoc fixed-term contract and does not intend to continue in the sector once it's over. Multiply her by all the current USS contributing members who in a similar situation, and if a significant proportion of them do the sums (and being academics, a much higher proportion of them will than would be the case in many other industries) and realise that because of this new 2.5% rule, contributing for a few years and then taking a small pension in a few decades' time simply isn't worth it, the USS will lose a lot of income, very quickly. Of course from the USS's perspective, the short-term losses will more than be offset by the long-term gains, but the danger is that those short term losses will be used as the pretext to downgrade the system even further.

Equally worryingly, the 2.5% rule is likely to act as a serious disincentive for academics in their early to mid 50s resigning, doing something else for a few years (e.g. starting a small business, working for a larger one and/or doing freelance consultancy) and then taking their pension. This is quite a frequent occurrence, and indeed is an eventual career path that did seem quite attractive to me until reading this proposal. I suspect that the result will be more academics in the final decade of their careers 'bed blocking' opportunities for newly minted PhDs and using their seniority to concentrate on the research and teaching that they like, while dumping the unpleasant jobs on the more diminished junior workforce who remain. In short, this proposal will act as a serious deterrent to the flow of expertise between academia and the private sector, in both directions, which I suspect will have very damaging results.

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i have about 9 years in USS - anybody know what my options are? is there any way i can close it, get some money back?

i can do better if i invest it myself.

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i have about 9 years in USS - anybody know what my options are? is there any way i can close it, get some money back?

i can do better if i invest it myself.

You'd have to check your individual scheme through the trustees,some are individually ringfenced which allows deferees to remove what's accrued and put it in a private pension pot,not all schemes allow this but this is the only way to protect against this theft however clearly you have to be confident in your own investment ability because if you get it wrong you are just as likely to lose it yourself

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..... we will be left with a society which favours those with inherited wealth at the cost of everyone else.

...

Tory Plan A.

All on track.

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If you have ever contributed to USS or are drawing a pension then read this! I think it could cause mass industrial action if it goes through.

Point "G)" is particularly insidious, because in the USS, people often work for a few years after doing a PhD., then leave to another career or another country. Those benefits were inflation protected to some degree by being linked to RPI. This has changed to CPI but crucially now is capped at 2.5%.

The difference between (fudged) CPI and 2.5% compounded (over, say 30 years) during a period of even modest inflation could rob you ENTIRELY of inflation protection; you will retire with a worthless pot.

http://www.uss.co.uk/news/Pages/StatementfromUSS.aspx

I have always said to myself that pensions will be worthless by the time I retire, but now I see the mechanism they intend to make it worthless by.

I guess this means I need more inflation protection. :angry::unsure:

MY PRIVATE SECTOR SCHEME HAS BEEN DOING THIS FOR YEARS.

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Whilst I know nothing of the USS, my employer has recently capped inflationary increases to 2.5% (could have been 2% - can't remember), however, this only applied to contributions post change. Any benefits already acrued were protected under the original terms; which I think capped inflationary increases at 5%. I'm pretty sure that the same will apply to any pension scheme. My view is that any benefits already accrued under a defined benefit scheme will almost certainly not be matched by private investment, at least not without significant risk. The same may not necessarily be said for future contributions - but unless inflation significantly exceeds the 2.5% cap, I suspect that one is better off staying in any defined benefit scheme.

Good luck - I think that we're all going to need it thanks to Gordon. He should be tried for crimes against pensioners, both current and future!

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I'm currently a USS member although I will probably be leaving Uni employment next year with 5 years service so this chance is of interest. The increased contribution makes sense but the CPI/2.5% link is of concern.

Currently USS pension benefits are:

Annual Pension - 1/80 * years of service * final salary

Lump Sum - 3* Annual Pension

For me with 5 years service this would work out at £1875 a year + £5625 lump sum. As this is inflation linked, to buy an annuity giving this much would cost between £40,000 and £50000 for retirement at 65. Assuming an inflation rate of 2.5% as used in the new USS rules, this would increase to a pot of about £100,000 to £120,000 in 35 years time.

The key would be what the transfer out value from the USS scheme would be - these are only available on request. Does anyone here know how they are calculated?

If it is relatively small compared to £40,000 then the likelihood of being able to grow it to larger than the £100-120k I mentioned earlier is low.

If it is close to £40k then I would be happy to transfer it into a SIPP and have a go at increasing it myself.

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The key would be what the transfer out value from the USS scheme would be - these are only available on request. Does anyone here know how they are calculated?

Well, it's usually an actuarial calculation based on your defined benefits and age I think rather than any notional share of the pot. I expect this would be done by PVing future payments discounted by your probability of being alive to receive them although the mortality statistics would probably be the ones experienced by the fund itself on average rather than anything specific to you (i.e. no reduced amount due to being a smoker or terminally ill or whatever). I'm not sure what yield curve would be used for stuff that far out in the future though - 50 years is about the maximum you can get to using gilts for example. Either way though, the number should be closer to the cost of buying an annuity than to your contributions plus investment growth. When you look at what gets paid into DB pension schemes vs. the cost of buying an annuity to produce the same level of benefit, it's easy to see why so many of these schemes are near enough insolvent.

There's a bit of info here:

http://www.thepensionsregulator.gov.uk/guidance/guidance-transfer-values.aspx#s1800

I have a small number of years in USS so I'll be asking for a transfer value to figure out whether it's worth moving it too.

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I have a small number of years in USS so I'll be asking for a transfer value to figure out whether it's worth moving it too.

Thanks for the reply. Once you get an answer, how are you going to decide if its better to transfer or stay put?

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Thanks for the reply. Once you get an answer, how are you going to decide if its better to transfer or stay put?

I'll compare the transfer value to the cost of an annuity at current prices. Based on past investment experience I've done a good job of at least matching RPI inflation over the last 15 years so I'll go on the basis that I can protect the value of what I get if not grow it. If the annuity cost is, say, 100K and the USS transfer value is within 20% of that I'll go with it, if USS is less than 80K, I'll leave it in place.

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I'll compare the transfer value to the cost of an annuity at current prices. Based on past investment experience I've done a good job of at least matching RPI inflation over the last 15 years so I'll go on the basis that I can protect the value of what I get if not grow it. If the annuity cost is, say, 100K and the USS transfer value is within 20% of that I'll go with it, if USS is less than 80K, I'll leave it in place.

Yes, that's roughly what I was planning to do. From looking at the USS website, their pension is RPI linked and 50% survivor benefits, so as you said an equivalent annuity would be pretty pricey.

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If you have ever contributed to USS or are drawing a pension then read this! I think it could cause mass industrial action if it goes through.

Point "G)" is particularly insidious, because in the USS, people often work for a few years after doing a PhD., then leave to another career or another country. Those benefits were inflation protected to some degree by being linked to RPI. This has changed to CPI but crucially now is capped at 2.5%.

The difference between (fudged) CPI and 2.5% compounded (over, say 30 years) during a period of even modest inflation could rob you ENTIRELY of inflation protection; you will retire with a worthless pot.

http://www.uss.co.uk/news/Pages/StatementfromUSS.aspx

I have always said to myself that pensions will be worthless by the time I retire, but now I see the mechanism they intend to make it worthless by.

I guess this means I need more inflation protection. :angry::unsure:

I was wondering when they would do something like that. The old 5% cap was bad enough.

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This will be particularly detrimental to women (and men) who take a child break. Family friendly policy heh?

Cut and cheesepare, we will be left with a society which favours those with inherited wealth at the cost of everyone else.

:angry: :angry:

the problem was that however well meaning so many of these social engineering projects were ..eg protecting women pension rights for unworked years, allowing pension plans to pass on to spouses and a whole raft of similar policies; they were all uncosted. So when we're looking at worthless pension plans we know we were all to blame when we failed to ask questions of the huge social engineering experiment over the last 13 years

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Hmmm. I was in USS back in 1990-92, but not really paying attention. I believe that entitles me to a few squid in deferred pension. How would I find out about my entitlement, and (now that I have a SIPP) whether there might be any mileage in transferring it?

I'd always assumed that, as a public-sector pension, it was always going to be better value left alone than moved out, despite my final salary in academia being at a 1992 Research Associate level.

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Guest sillybear2

So a bunch of crusty old Marxists have been f****d by some failed collectivist scheme that failed to deliver on its promises, oh the irony.

Nobody seriously thought these schemes would be able to survive the demographic onslaught, did they? It's like the lottery, it has a produced a handful of winners in the past and that somehow fooled everyone else.

http://www.telegraph.co.uk/finance/comment/liamhalligan/7883224/Public-sector-pensions-unfunded-and-heading-rapidly-off-the-rails.html

Edited by sillybear2

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I'll compare the transfer value to the cost of an annuity at current prices. Based on past investment experience I've done a good job of at least matching RPI inflation over the last 15 years so I'll go on the basis that I can protect the value of what I get if not grow it. If the annuity cost is, say, 100K and the USS transfer value is within 20% of that I'll go with it, if USS is less than 80K, I'll leave it in place.

Good thinking but all still based on the assumption they wont change it again in the next 35 years.

If they make too big a change in one go everyone will transfer out. Lots of little ones and wt will just keep reassessing yous options every few years and never jumping. As i have done with endowments much to my annoyance

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Guest sillybear2

Good thinking but all still based on the assumption they wont change it again in the next 35 years.

If they make too big a change in one go everyone will transfer out. Lots of little ones and wt will just keep reassessing yous options every few years and never jumping. As i have done with endowments much to my annoyance

It looks like this is more significant than the indexing :-

"Cost sharing will be introduced with cost increases shared 65:35 between employers and employees respectively."

Most of the other changes are the usual can kicking, raising the retirement age for new entrants, and increasing employee contributions, that will mainly affect younger workers and basically leave everyone else sitting pretty. Eventually all these schemes will be declared formally insolvent and be folded into some kind of super PPF, they will then cap payments and rig the indexing, regardless of existing contract terms.

The liabilities are so huge they can never be met with anything other than diluted money, but they need to keep the illusion alive, so they're breaking it to people gently.

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I have always said to myself that pensions will be worthless by the time I retire, but now I see the mechanism they intend to make it worthless by.

I guess this means I need more inflation protection. :angry::unsure:

Like others I too am in the USS scheme -coming up 9 years paying in.

I really do not understand pensions, can someone explain exactly what these changes mean? Is this a switch away from being a final salary?

I too have been quite vocal at work by stating that the fund will be be worth nothing by the time I retire so it would be nice to sound like an expert when this comes up with collegues.

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Guest sillybear2

Like others I too am in the USS scheme -coming up 9 years paying in.

I really do not understand pensions, can someone explain exactly what these changes mean? Is this a switch away from being a final salary?

I too have been quite vocal at work by stating that the fund will be be worth nothing by the time I retire so it would be nice to sound like an expert when this comes up with collegues.

It's still final salary, your retirement age will be raised (then linked to the state pension retirement age) if you're under 55, and your employee contribution will be slightly more, if you're paying into the scheme then there will be a 5% cap on the inflation protection, which drops to 2.5% for those who have left academia (what are they gonna do, strike?). It's no biggie to be honest, the real changes down the line will be the eventual introduction of salary averages (for everyone going forward, not just new entrants) and hybrid defined benefit / defined contribution schemes, but they're not ready to drop that bomb yet.

Edited by sillybear2

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  • 145 Brexit, House prices and Summer 2020

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