Proposed Merger of OUSS with USS

1. Proposed Merger of OUSS with USS Miles Hedges Finance Director

2. Agenda • Reasons for the proposal • Process • Timescales • Comparison of the two schemes • What happens next? • Your questions

3. Reasons for the Proposal • Benefits for staff • Benefits for the University • Cost to the University

4. Benefits for Staff • One scheme for everyone • Eliminates the promotion problem • Allows staff greater mobility between universities • Provides security of a national pension scheme

5. Benefits to the University • Greater stability of its future pension contributions • Greater stability of its reported pension costs • Remove administrative burden of dealing with more than one pension scheme

6. Cost to the University • The University is willing to pay a premium in order to achieve the benefits for staff and itself • There is a limit to the amount of the premium that can be afforded

7. Process A long and complex process, involving: • The University Council – merger approved in principle up to a given financial cost • USS Trustees – the merger process and template has already been approved in principle • OUSS Trustees – have to be satisfied that the merger is in the best interests of members • OUSS Members – have to be satisfied that the merger is in their best interests

8. Process • Discuss proposals with trade unions • Put project team in place • Inform staff – including this meeting • Negotiate terms with USS • Take legal advice – both University and OUSS Trustees • Take actuarial advice This is a long and complex process

9. Timescales • Sep 2003 – Council decision in principle • Oct 2003 – commenced discussions with trade unions • Nov 2003 – project team formed; letter to all staff in OUSS • Dec 2003 – open meeting for all staff; discussions with USS • Jan 2004 – continued consultation with staff • Mar 2004 – target date to agree principles of merger • Jul 2004 – target date to complete merger if terms and financial conditions are right

10. USS National scheme Security based on HE sector as a whole Retirement age 65 Option to retire from active service at 60 OUSS Local scheme Security depends on a single employer Retirement age 65 Option to retire from 60 Comparison of the two schemes

11. USS Pension = 1/80th of salary for each year of service PLUS Lump sum of 3/80th of salary for each year of service Can convert lump sum into pension OUSS Pension = 1/60th of salary for each year of service Can convert pension into lump sum up to Inland Revenue limit Comparison of the two schemes

12. USS Dependent’s pension = 1/160th for each year of service Lump sum death in service benefit = 3 x salary Ill health pension = full service to normal retirement date OUSS Dependent’s pension = 1/120th for each year of service Lump sum death in service benefit = 2 x salary + refund of contrib’ns Ill health pension = service to date + 5 years Comparison of the two schemes

13. USS Employee’s contribution = 6.35% less tax relief Maximum pension increase = RPI increase OUSS Employee’s contribution = 6.00% less tax relief Maximum pension increase = RPI up to a maximum of 5% in any one year Comparison of the two schemes

19. Comparison of the two schemes • Merger is the last stage in a long process • Many changes have been made in the past to bring benefits together – generally these involved increasing OUSS benefits but not always • Remaining changes involve some measure of trade-off – in the same way as buying an insurance policy buys peace of mind if things go against you

20. What happens next? Communication plan: • Letter to you • Today’s meeting • Your questions and our responses • Regular progress reports Key dates: • March – agree merger principle • August – start of your USS membership

21. Your Questions • To the panel now – Philip Marsh, Joe Devlin & Miles Hedges • Information and questions and their responses will be posted on Personnel intranet • Email to pensions-merger@open.ac.uk • To your trade union representatives