The Universities Superannuation Scheme (USS) has launched a consultation on the funding assumptions and methodology for its 2026 actuarial valuation, proposing a future contribution rate of 16.4%, down from the current overall rate of 20.6%.
Based on the proposed assumptions, the scheme has a surplus of £16.9bn and a funding level of 127%, compared with a £7.4bn surplus and a funding level of 111% at the 2023 valuation.
USS attributed the stronger funding position to favourable financial market conditions and the strong performance of its defined benefit assets relative to its liabilities.
The proposed future service cost of 16.4% of salaries reflects the improved funding position, although the final overall contribution rate will be determined after the consultation.
USS said its current funding position provides an opportunity to discuss stakeholders’ strategic objectives for the scheme, including what they want to achieve – and avoid – at the 2026 valuation and over the longer term.
The trustee will determine the overall contribution rate after considering the response from the Universities and Colleges Employers Association (UCEA) and advice from the scheme actuary. The Joint Negotiating Committee will then decide whether any changes should be made.
Alongside the statutory consultation, USS said it is seeking to confirm employers’ preliminary views, given the provisional results indicate the scheme could continue to support existing benefit and contribution levels.
It added that the improved funding position also provides scope for a range of alternative options, which employers will be able to consider during the consultation.
Dame Kate Barker, chair of the USS board, said: “A sustained and material surplus provides a chance to consider the Scheme’s strategic direction. This is a welcome change to the funding challenges USS faced over the previous decade.
“The current strong funding position presents an opportunity to put USS on a long-term stable footing, which would be consistent with what the sector said it wanted to achieve at the 2023 valuation. This was also a major theme in early discussions on the 2026 valuation.
“But there are choices to be considered, so it is important the sector is clear about what it wants to achieve — and what it wants to avoid — at this valuation and over the long term.”
