The following glossary explains frequently used terms that are relevant to USS, pensions and investments more broadly and the proposed changes to future benefit arrangements provided by the Scheme.
The proportion of salary a member receives annually as a pension in retirement for each year of active membership of the Retirement Income Builder section of the Scheme, e.g. currently 1/75th of your salary up to the Salary Threshold is built up each year under the Retirement Income Builder (the defined benefit section of USS). One of the proposals being consulted on is to change the accrual rate to 1/85ths.
A member of USS who is currently paying contributions and building up benefits in the Scheme, and people who are paying special contributions to the Scheme as a special election. It also includes members that are not currently paying contributions but remain 'active' during, for example, a period of authorised absence such as unpaid maternity/paternity leave, or paid sick leave where contributions are still being paid to the Scheme.
Deferred and pensioner members are generally not active members. However, there are limited cases where they may have benefits in USS under more than one category, for example those who flexibly retire.
A qualified professional skilled in evaluating and assessing pensions and related risks, particularly long-term demographic and financial risks.
+Added years AVCs
Extra voluntary contributions to the Scheme that purchased additional days and years of service. The option to begin new arrangements to purchase added years AVCs ceased from 1 April 2016.
+Additional contributions (also called additional voluntary contributions (AVCs))
The contributions above a member's normal contributions, which you may choose to pay to the Investment Builder (the DC section of the Scheme) in order to build up additional savings.
An active member of USS or someone who is eligible to join the Scheme in the course of their current employment – so someone that the proposed Scheme changes would affect, should they be implemented.
An insurance policy you can buy upon retirement using your DC pension savings. It usually pays a guaranteed income for life. The income received will depend on a number of factors, including the amount of money in your pot, the level of indexation of the pension you wish to have, market conditions, your age, your health and whether a survivor's pension will be provided upon your death.
In the context of USS, these are the different types of investments held within the fund and purchased using the contributions made to the Scheme. The assets may include, for example, company shares, government bonds, property, infrastructure and cash. The assets back the benefits provided by the Scheme.
The statutory process that allows affected employees and appropriate representative bodies to respond to the proposed Scheme changes.
+Consumer Prices Index (CPI)
An official measure of inflation used in the UK and published monthly by the Office for National Statistics.
A member who has been an active member, but who is no longer contributing to USS and otherwise known as an 'early leaver'.
+Defined benefit (DB) arrangement
A type of pension arrangement that offers a set level of benefits at retirement, usually based on a formula that takes account of your salary and service. The Retirement Income Builder is a defined benefit arrangement.
Your contributions and the contributions your employer pay earn you a proportion of your salary as a retirement benefit. This benefit accumulates over time and when you retire, you will receive your pension and lump sum benefits.
+Defined contribution (DC) arrangement
A type of pension arrangement in which the member builds up a fund to be used to provide benefits later in life. The fund is based on the amount contributed by both the member and the employer, how the contributions are invested, the effect of charges (which in USS are by industry standards comparatively low) and how those investments perform. It differs from a DB arrangement in that it does not offer a 'set level' of benefits. The Investment Builder is a DC arrangement.
Government reforms, and improvements to Scheme rules and USS policies, have increased your options for using savings built up in the Investment Builder, the defined contribution section of USS, providing you with more flexibility as you approach retirement.
Flexi-access drawdown allows you to draw income from a DC pot, whilst leaving the balance invested. You would have to transfer out of the Scheme to a drawdown provider to access your Investment Builder funds in this way (but USS can help you do this at retirement).
+Ill health retirement
Also referred to as incapacity retirement.
If you've been a USS member for at least two years (generally speaking), the Scheme will pay you retirement benefits (subject to you satisfying certain criteria), which have not been actuarially reduced for early payment, from any age if you have an illness or condition that prevents you from working or reduces your capacity to work. Enhanced incapacity benefits are also payable in some circumstances.
The potential for loss in the value of assets relative to objectives or expectations, or for lower returns on investment than expected. The level of risk is different for different types of investment. Generally higher-risk investments (such as equities) offer higher potential returns than lower-risk investments (such as bonds) but offer less certainty over the future returns.
If you've earned above the Salary Threshold, transferred money into USS from another pension scheme since October 2016 and/or made additional contributions since October 2016, you'll have built up Investment Builder savings.
The Investment Builder is the defined contribution section of the Scheme. It is a flexible way to save for the future, allowing you to invest in one or more of the 10 'Let Me Do It' funds, or you can choose either the Default Lifestyle or Ethical Lifestyle 'Do It For Me' options and USS will manage your investments for you on your behalf. If you don’t make an investment choice, you'll automatically be invested in the Default Lifestyle Option.
There are various ways in which you can take your savings from the Investment Builder, including as a tax-free cash lump sum or sums, transferring out to another provider to access a drawdown product or buying an annuity, the latter of which will usually provide a guaranteed income for life.
In the context of the Scheme, the liabilities are the value of pension benefits which have been accrued by members in the Retirement Income Builder to date and which are due from the Scheme both now and in the future.
By law, liabilities have to be based on certain assumptions because it's impossible to know for definite in advance what might happen, for example, how long an individual pensioner will live to draw a pension. The value of the liabilities is, therefore, based on assumptions made by the Trustee, having taken advice from the Scheme actuary. The Trustee is under a duty to act prudently in setting the assumptions.
+Money purchase AVCs (MPAVCs)
USS historically offered an arrangement administered by Prudential which allowed members to invest in a range of funds by making additional voluntary contributions on a DC basis. This arrangement is now closed to new members and has been replaced by the Investment Builder.
Normal contributions are currently 9.8% of salary, and employers pay 21.4%. Under the JNC proposals these rates will continue after 1 April 2022. However, in the event that no changes are made to the current benefit structure of the Scheme, then contributions would need to increase every six months from 1 April 2022 onwards to ensure the existing benefit structure is adequately funded (see the fall-back position).
+Normal Pension Age (NPA)
Currently age 66, NPA is the earliest age from which you’re entitled to draw benefits from the Retirement Income Builder without actuarial reduction (with the exception of special circumstances, such as ill-health retirement). The NPA will change in the future broadly in line with increases to the State Pension Age.
+Official pensions (and increases in line with official pensions)
Also refer to Public Service Pension Scheme.
Official pension increases are paid to workers in the public sector, such as teachers and civil servants. Increases in official pensions are currently linked to CPI inflation. USS will match the full increases for any USS benefits you earned before October 2011. For benefits earned after that date USS currently matches increases in official pensions for the first 5%. If official pensions increase by more than 5%, USS will pay half of the difference up to a maximum increase of 10%. The JNC has recommended that future increases applied to benefits earned from 1 April 2022 will change, with a cap of 2.5% applying to increases in any given year.
+Pension Protection Fund (PPF)
A compensation scheme set up by the government to provide a minimum level of benefit to members of defined benefit schemes whose sponsoring employers become insolvent and where the schemes have insufficient assets to pay the pension benefits owed.
+Retirement Income Builder
Currently, when you become a member of USS you automatically join the Retirement Income Builder. This provides you with a set level of retirement income, based on your salary during each year of membership and how long you've been a member of the Scheme.
Every year, you currently earn 1/75th of your salary (up to the Salary Threshold) as your pension. At the end of each Scheme year, your benefits are calculated and 'banked'. They increase broadly in line with inflation (subject to a cap) before and after retirement in line with Official pensions (subject to certain caps).
A USS member who has retired from employment and taken pension benefits.
Defined under the Scheme rules as a cessation of employment (or the cessation of active membership on the grounds of incapacity) on or after minimum pension age (currently 55) without a member taking in either case any other employment which would give entitlement to membership of the Scheme.
When you become a member of USS you automatically join the Retirement Income Builder. You’ll make contributions based on your salary, up to an annual Salary Threshold, this is £59,883.65 for the 2021/2022 Scheme year. If you earn above the Salary Threshold, you and your employer will contribute to the Investment Builder.
It is proposed that the Salary Threshold will reduce to £40,000 with effect from 1 April 2022.
The Salary Threshold increased in line with official pensions, but subject to an annual cap. Currently, USS will match official pension increases up to 5%. Where the increase in official pensions exceeds 5%, one-half of the excess above 5% is also taken into account with a maximum increase of 10% in all cases.
It is proposed that this cap will now be 2.5% for increases applied from 1 April 2022 until 31 March 2025 or if earlier, the date of any change concluded by a review of the JNC of the amount of the Salary Threshold.
An independent actuary appointed by the Trustee, as required by law.
+Tax-free cash lump sum
Once you retire, you'll get an income for life from the Retirement Income Builder and a one-off, tax-free (up to a limit) cash lump sum of three times your annual pension. You can choose to have a higher monthly income and a lower cash lump sum – or vice versa. It's up to you.
And if you have savings in the Investment Builder too, you can take some or all of these as a cash lump sum or sums or use your savings to purchase an annuity from an insurer.
But there's a limit on the amount of benefits that can be taken as tax-free cash.
Broadly the level of assets required by the Trustee to provide the pensions already promised under the rules of the Scheme.
+The Pensions Regulator (TPR)
The independent body responsible for the regulation of work-based pension schemes in the UK. Its key objectives are protecting the interests of scheme members, promoting good administration, reducing the risk of claims on the Pension Protection Fund, making sure employers fulfil their auto-enrolment duties and making sure employer growth is taken into consideration.
See the Universities Superannuation Scheme.
Universities Superannuation Scheme Limited is the trustee company that runs the Scheme for the benefit of members, on behalf of sponsoring employees. The Trustee's role is to ensure the Scheme is run in accordance with the Scheme rules and regulatory and legislative requirements.
The trustee board is made up of representatives of the Scheme's sponsoring employers (nominated by Universities UK), representatives of the Scheme's members (nominated by UCU) and independent members who have particular pensions and investments skills (appointed by the trustee board itself).
+Universities UK (UUK)
A representative organisation for the UK's universities supporting the work of universities and promoting their interests.
+Universities Superannuation Scheme (USS)
The Universities Superannuation Scheme is the principal occupational pension scheme for universities and higher education institutions in the UK. Approaching almost 400,000 members across more than 340 institutions, USS is the largest private pension scheme in th the UK in terms of assets.
+Universities Superannuation Scheme Limited
See the Trustee.
+University and College Union (UCU)
A trade union and professional association for academics, lecturers, trainers, researchers and academic-related staff working in further and higher education throughout the UK.
+USS Investment Management Limited
USS Investment Management Limited (USSIM) is a wholly owned subsidiary of Universities Superannuation Scheme Limited. Its role is to provide investment management and advisory services to the Trustee.
+USS Trustee Board
See Trustee board.
This publication is for general guidance only. It is not a legal document and does not explain all situations or eventualities. USS is governed by a trust deed and rules and if there is any difference between this publication and the trust deed and rules the latter prevail. Members are advised to check with their employer contact for latest information regarding the Scheme, and any changes that may have occurred to its rules and benefits.