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USS Briefing

USS Briefing. Edinburgh 2012. Conference decision. Priorities in the negotiations de-risk USS through the introduction of an acceptable CARE scheme for new entrants;

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USS Briefing

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  1. USS Briefing Edinburgh 2012

  2. Conference decision Priorities in the negotiations • de-risk USS through the introduction of an acceptable CARE scheme for new entrants; • close the gap between the value of the CARE and final salary sections by negotiating improvements to the CARE scheme which would secure broad comparability with TPS, including the removal of inflation caps; and • protect the final salary pensions of existing members.

  3. Conference also said “Conference resolves that any resumption of negotiations on USS with the employers should be followed by a series of briefings and consultation with branches and members on the comparative analysis of the USS and TPS schemes and should include discussion on options for changes including: a. an exploration of the scope for funding any adjustments in benefits to address the gap between the scheme including the removal of the inflation caps and, in particular, the capacity of the schemes to absorb costs, without changes to contribution rates. b. an exploration of the scope to design enhanced benefit sections of the USS CRB scheme to address the gap between USS and TPS with USS members being given the option to join the enhanced section or sections on the basis of: (i) an increase contribution rate or (ii) the purchase of enhanced benefits on an individually costed

  4. Funding position in 2011 • UCU believed that the technical provisions could be set to be 100% funded • USS set the technical provisions so scheme was 92% funded • USS also set the future returns from the funds investment at gilts + 1.7% (return of 6.1% on investment) • This required a recovery plan

  5. Recovery Plan • Eliminate the shortfall of £2.9 billion over 10 years by • An assumption that the scheme’s investments will deliver a return of 0.51% (6.61% ) on investment • Employers pay 16% (3.4% above what is needed) for 6 years • Then 4 years of 2% above the estimated future cost of accrual at that time

  6. Funding position 2012 • 77% funded at 31st March 2012 • Why? • The liabilities of the scheme had increased by 24%, due to quantitative easing and historically low gilt yields, in this economic climate. • The actual assets have improved and the cost of providing the pension promises has not changed, it is result of how pensions have to be accounted for and if gilts where averaged over 20 years there would be no problem or underfunding

  7. Post 92 contributions against USS 6.5% for CRB members

  8. Options 1)   Improvements to USS CRB Section Broad comparability with TPS including   - no holidays during inflation capping - better accrual rate - better revaluation rate - removal of inflation cap 2)   But need to consider the favourable aspects of USS including -  indefinite protection for final salary section via -  lump sum -  death in service benefits -  redundancy protection -  lower contribution rates

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