​USS emphasises value for money after ‘unwelcome’ benefit changes

The UK’s Universities Superannuation Scheme (USS) – one of the country’s last defined benefit (DB) schemes still open for new contributions – has emphasised the value for money it offers in its annual report, at the end of a year in which unpopular benefit changes were made.

In the report for the year to 31 March 2022, USS revealed that its total assets under management had risen to £90.8bn (€107.1bn) from £82.2bn, and within that, its DB fund had grown to £88.9bn from £80.6bn.

The scheme’s defined contribution (DC) assets, meanwhile, grew to £1.9bn from £1.6bn 12 months before, USS reported.

Membership grew by almost 25,000 in the reporting period to 500,584, USS said. This figure included 212,306 active, 207,201 deferred and 81,077 retired members.

All members of USS are part of the scheme’s DB section, USS said, adding that according to the Pension Protection Fund, USS members accounted for more than a fifth of the fewer than 1 million UK people still actively paying into private DB schemes.

“USS is in the 11% of the remaining DB schemes that are open to new members,” it said.

The university staff pension scheme said it estimated its DB funding deficit at £1.5bn on a technical provisions basis at the end of March, with a funding ratio of 98%.

USS has faced significant opposition from university staff in its efforts to implement benefit changes deemed necessary following to a low valuation made at the end of March 2020.

For the first time, this year the pension scheme included a “value for money” supplement in its annual report, presenting analysis on the cost of running the scheme.

It said that according to the latest independent analysis by CEM Benchmarking, USS’s annual investment management costs were the equivalent of £101m lower than its global peer median.

“This is a long-term trend; over the last five annual independent benchmarking reports, USS has been assessed as being 24% less expensive – equivalent to £384m cheaper over that period,” the pension scheme said.

Kate Barker, chair of the Universities Superannuation Scheme Limited (USSL) trustee board, said: “Over the past year, we have wrestled with significant issues and difficult decisions, but the benefit changes introduced this year – as unwelcome as they were – have put the scheme on an affordable and more stable footing.”

She said that for the first time in some years, recent data indicated USS could be on track to achieving a more robust funding position.

“And our hope is that conditions improve over time, sufficient to allow more positive discussions in future,” said Barker.

At the beginning of June, USS chief executive officer Bill Galvin said in an update that the scheme would carry out a more detailed assessment on whether its indicative funding position at the end of March could point to higher benefits or lower contributions, or a combination.

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