The assumptions on which this modeller is based do not reflect the JNC’s recommendation, which has been approved by the USS Trustee Board, regarding the temporary suspension to the reduction of the cap on pre and post retirement increases to Retirement Income Builder benefits. The current increases cap will continue to apply for most members on each increase date from 1 April 2023 until 1 April 2025 on Retirement Income Builder benefits accrued on and from 1 April 2022 up to and including 31 March 2024. Further details of the current increases cap and the temporary suspension are outlined in the notice that you have received from USS setting out the agreed changes. The temporary suspension is subject to the Trustee’s consultation with Universities UK on the statutory funding documents.
This benefit comparison modeller (“modeller”) has been created to provide you with the opportunity to compare your estimated future pension benefits in USS under the current scheme structure and the proposed benefit structure set out in the USS Joint Negotiating Committee’s resolution of 31 August 2021.
The modeller does not confer any entitlement/guarantee to the benefits shown and should be used only to compare an estimation of your potential benefits. The information shown in this modeller is based on the information currently available and the assumptions as detailed below and in the notes accompanying the modeller. Your benefits at retirement will always be calculated in accordance with the Rules of USS at the time the benefits become payable and any overriding legislation. If there are inconsistencies between this modeller and the Scheme Rules, the Scheme Rules will always prevail.
All modeller results are shown in values in today’s terms. All benefit figures are rounded to the lower £10. All cost figures are rounded to the nearest £1.
Any choices you make while using the modeller, or data that you enter, are removed once you have finished using the modeller.
The modeller does not reflect some complexities which affect a restricted number of members. These are listed below. If you are affected by any of these categories, then the modeller may not properly reflect your current or potential future benefits.
Historic mergers and non-aggregated service – If you have deferred benefits as a result of a previous merger with USS (i.e. OUSS, AUT, Henley Management College or EUSA), or if you had a previous period of service in USS which was not linked to your new service on re-joining the scheme, then these deferred benefits will not be shown in the results.
NHS transfers – The modeller assumes that any benefits built up before 1 October 2011 are payable unreduced from age 60. If you transferred in previous NHS benefits you may (depending on your NHS category) be able to take your benefits unreduced from an earlier age than 60, in which case you should disregard the results shown for retirement ages earlier than age 60.
Enhanced opt-out members – If you have taken the scheme’s ‘enhanced opt-out’ option for tax reasons then you will no longer be actively accruing benefits in the scheme. The modeller will show your accrued benefits built up to the date of your latest annual member statement separately, but will also assume that you build up further benefits in the scheme from this date up to your selected retirement age. You should therefore disregard the results shown for any benefits built up after the statement date, as they will be incorrect.
Exempt members – If you were a member of the Scheme on 30 September 2011 and aged 55 or over on 1 October 2011 then you are classed as an Exempt member and your retirement age for benefits accruing from 1 October 2011 remained at 63.5 (or earlier contractual pension age). The modeller doesn’t reflect this and assumes that your retirement age increased in the same way as all other members in the Scheme from 1 October 2011.
Members with benefits accrued prior to 1 April 1995 – If you have benefits in the scheme earnt prior to 1 April 1995, any early retirement age selected before 60 will not be calculated correctly by the modeller and the values shown may be over- or understated depending on your service history prior to 1 April 1995.
Flexible retirees – If you have taken advantage of the flexible retirement opportunities in the scheme, and have started to receive part of your pension while still accruing further benefits, then the modeller may not reflect the correct position.
Variable time employees – The modeller will assume that your annual salary figure entered is payable in equal monthly amounts across each year. If the salary from your variable time employment varies from month to month then your benefits may differ from the results shown, and you should therefore disregard the results as they will be incorrect.
Money purchase AVCs – The modeller does not include money purchase additional voluntary contributions (“MPAVCs”) made to Prudential to date unless your MPAVC funds have been switched into the Investment Builder and you enter your Investment Builder fund into the modeller.
Added years / Revalued benefit AVCs – The modeller will only include the amount of additional years/pension purchased as shown in your latest annual member statement. Any additional years/pension purchased that have not been included on your statement, or any additional years/pension purchased after the date of your latest statement, will not be included in the results.
Pre-01/04/2016 divorce deductions – The modeller assumes deductions are made from the outset, not at retirement, and as such will apply early or late retirement factors to the deduction incorrectly. For such members, the modeller results will not correctly reflect benefits for early or late retirement.
Additional Voluntary Contributions (AVCs) – If you retire prior to the retirement date in your AVC contract, your AVCs will be reduced for early payment, however this is not reflected in the modeller. Therefore, your benefits may be overstated.
Pre-2011 Transfers In – For members that transferred in benefits before 1 October 2011, that have a normal retirement age (NRA) of 65, the modeller will not correctly apply an early retirement factor to these benefits if you select a retirement age below 65. As such your benefits may be overstated.
The benefit modeller will estimate the value of your benefits based on:
- If you have logged into the modeller using your member number and the other required information, where possible it has been pre-populated with data from your latest annual member statement date which is your accrued USS Retirement Income Builder benefits built up as at 31 March 2021, but it will use the value input by you if you choose to enter this yourself;
- The current annual salary you provide on the About you section;
- The value of your Investment Builder fund you provide on the About you section, as at the date you input;
- Any further data you provide on the About you section; and Assumptions about the future, such as salary growth, inflation and investment returns.
- Your estimated benefits are projected to the retirement age chosen by you and then adjusted so that they are expressed in terms of today’s prices. For modelling purposes 1 April 2022 is assumed to be the calculation date.
If the date of retirement you select is earlier or later than your normal pension age then your benefits may be reduced or increased to reflect the fact that you will be expected to receive them for a longer or shorter period of time.
The projections are based on certain assumptions about what will happen from the current date until you retire. This is of course unlikely to reflect what will actually happen in practice. As a result, the actual amount of pension you receive at retirement will be higher or lower than the figure shown by the modeller, as those eventual benefits will depend on many factors.
The assumptions underlying this modeller are detailed below and it is very important that you read this information. Please remember that there is no guarantee that the assumptions will be borne out in practice.
The assumptions have been approved by UUK for the purpose of the USS Trustee facilitating the provision of a benefit modeller to support the employer consultation.
The benefit modeller allows you to vary the inflation rate from the default of 2.5% a year. This inflation rate, or the rate you select, is then assumed to apply from the current date until you retire, and all future pension increases, including the 1 April 2022 pension increase, are assumed to be based on this level. For the potential new benefit structure, where annual pension increases are capped at 2.5% a year, the allowance in the modeller is for increases to be 0.5% less than inflation up to a maximum of rate of inflation of 2.5% a year (and for annual pension increases to be 2.0% for inflation above 2.5%). In theory, this deduction should vary depending on the level of CPI. However, this model has been simplified such that it produces a reasonable assumption in the middle of the CPI range (i.e for CPI at 2.5%) but this assumption becomes less reliable the more that CPI is assumed to move away from this. If average inflation is less than 2.5%, the 2.5% cap could still have an effect because in some years inflation could be higher. Your benefits are shown in today’s terms – in other words, your benefits are discounted back from retirement to 1 April 2022 at this assumed inflation rate to enable you to make a meaningful comparison.
The assumptions for salary growth (default 4.0% p.a.) and investment returns (default 4.77% p.a.) under the ‘Fixed Rate’ option can be varied by you, allowing you to see how your benefits can vary depending on what happens in the future. Note that the ranges provided for illustration in the modeller are not intended to indicate that there is a limit on possible actual investment returns or salary growth in reality. Actual experience of these between now and retirement could be higher or lower than the ranges in the modeller. If the Lifestyle option is selected the investment returns are pre-set and are not affected by your choice of investment return.
Please note in particular that the benefit modeller will project your Investment Builder using only the single investment return assumption chosen by you (default 4.77% p.a.), unless you use the default ‘lifestyle’ option. As a result of this simplification, the figures shown in the modeller will therefore differ from those in your annual member statement which will allow for different investment return assumptions across each fund that you are invested in. If you choose the ‘lifestyle’ approach the modeller will assume you are invested in the Investment Builder ‘Do it for me’ investment option – see "Why is the estimated value of my Investment Builder at retirement different than the value shown in my annual member statement" below for more on this.
Please note that if you select the ‘drawdown’ option for your USS Investment Builder benefits, when estimating the period for which funds will last, the modeller will assume that you have retired at your Target Retirement Age and therefore your funds are invested in the post-retirement investment funds and proportions defined in the ‘Do it for me’ investment option. The number of years that your fund is assumed to last is determined on pre-set assumptions, which are unaffected by any choices you have made to the pre-retirement assumptions.
Please note that if you select the 'annuity' option for your USS Investment Builder benefits, the annuity value used is based on the annuity assumptions underlying the Statutory Money Purchase Illustration (SMPI) benefit projections (see below for more detail on these) provided by USS. These assumptions are independent to those selected for pre-retirement projections and assume the pension purchased is inflation linked.
Please note that the modeller will show your future service benefits from the date of your latest annual member statement. In order to do this, you will need to input your annual salary. If you change the annual salary increase assumption in the modeller, this will be reflected in the projection. If your actual salary progression is different to that assumed for this period, your actual benefits will differ from those illustrated.
If you have selected the non-login (prospective) version of the modeller, then please note that the tool will assume that you joined the scheme on 1 April 2021, and will estimate benefits accrued from this date up to your selected retirement age, unless you enter your annual member statement details manually. If you do enter your details manually it will assume all pension has been accrued after 1 October 2020. The Normal Retirement Age in USS changes in line with increases to the State Pension Age. The modeller assumes the Normal Retirement Age for USS will remain at 66 for all benefits accrued from October 2020. No further planned increases in State Pension Age have been allowed for in the modeller.
The pension projections provided by the modeller also assume that:
- You remain a member of USS until your chosen retirement age without any career breaks or significant change in your annual salary (other than by the annual salary increase assumption or career promotion increases as entered by you).
- For the current Scheme structure, that the rules of USS remain the same until your chosen retirement age (the rules of the Scheme could change in the future).
- Your benefits are calculated annually, with the Salary being applied at its annual value.
- The 1 April 2022 revaluation of benefits/pension increase is not known at the time of calculation.
- The modeller uses the current actuarial factors to adjust benefits for early or late payment. These are subject to regular review and may not reflect those which will apply at your actual retirement.
Please note the default assumptions, the assumptions you select, and the ranges of assumptions available to you, are not necessarily those that would have been selected by the USS Trustee if it had provided a modeller tool for these purposes. The following are those where the default rate used for this modeller differs from the assumptions used for the 2021 benefit statements provided by the USS Trustee:
- Salary increases: the 2021 benefit statements used an annual increase assumption of 2.5% p.a. compared to 4.0% used as the default in this modeller;
The following are assumptions or outputs for which the USS Trustee has no previous comparator:
- Drawdown: the USS Trustee has not previously illustrated drawdown pensions and has no previous assumptions. The 'Cost to You' figures assume you pay contributions via a salary sacrifice arrangement with your employer. The figures set out an estimate of the position pre- and post-Income Tax and National Insurance deductions. Please note these are estimates and are based on the Income Tax and National Insurance thresholds applicable in the 2021/22 tax year, and assume you are entitled to the full single person’s tax-free allowance and are not subject to any Annual Allowance provisions, charges or restrictions.
DISCLAIMER - Please note that this benefit modeller is intended to provide estimates only for the purpose of comparison of benefits at retirement based on the current benefit structure with benefits at retirement based on accrued benefits at 1 April 2022 and the JNC’s proposed benefit structure thereafter. You should not rely on the modeller for making decisions relating to your retirement. We also strongly recommend that you take financial advice before making any retirement decisions. You can find a financial adviser through MoneyHelper which brings three legacy consumer brands into one (Money Advice Service, The Pensions Advisory Service and Pension Wise). MoneyHelper is there to make your money and pension choices clearer. They offer impartial guidance that's backed by the government and free to use. MoneyHelper is available at www.moneyhelper.org.uk. You may be charged a fee for any advice you receive.
For the avoidance of any doubt, the modeller is not intended to constitute or provide to you actuarial advice. You should take any professional advice that you feel you need to understand the changes being proposed.
Neither Universities Superannuation Scheme Ltd nor any of their officers or employees accept any responsibility or liability for any loss, damage or inconvenience caused by action taken (or a decision not to take action) as a result of information provided by the modeller. Any part of these terms and conditions may be changed without notice and your continued use of the modeller will be deemed as acceptance of these terms and the disclaimers/assumptions (and any updates to them). Any part of this modeller may be modified or removed it in its entirety without warning or liability arising from such an action.
Any dissemination, forwarding or copying of any part of this modeller is strictly prohibited and may be unlawful.
Why is the estimated value of my Investment Builder at retirement different than the value shown in my annual member statement?
If you have funds in the Investment Builder, then your annual member statement will include a projection of your Investment Builder fund value at retirement, known as a Statutory Money Purchase Illustration (SMPI). The value shown in the modeller may be different than that shown in your statement, for a number of reasons:
- Both the modeller and the annual member statement make assumptions about the returns in the future. These assumptions can be influenced by a number of factors. The assumptions used in your annual member statement projections are required by law and are set in order to comply with the guidelines for SMPIs set out by the Financial Reporting Council (FRC) in their Actuarial Standards Technical Memorandum 1 - more details on these can be found here. The projections in the modeller however, provide you with greater flexibility to select your own assumptions such as your level of salary growth each year and future returns you may experience. These can be varied to allow you to consider different scenarios and may be different than those used in your annual benefit statement.
- The annual member statement will have projected your Investment Builder to your selected Target Retirement Age. In the modeller you can set your retirement age to any value between ages 55 and 75. The modeller’s default retirement age is 66.
- If you chose the “Do it for me” investment option (or didn’t make any investment choice), the projection in your annual member statement assumes your investments will change automatically as you approach your Target Retirement Age, in line with the automatic switches for de-risking that are built into these options. The modeller allows you to select your own assumptions, and no adjustment is made for automatic switches.
- The initial fund values used in either projection will be as at different dates. The projections in your annual member statement are based initially on your Investment Builder as at 31 March each year, whereas the modeller uses the value available (as entered by you on the “your details” section). The difference will be particularly noticeable if there have been any major changes in your Investment Builder since your latest annual member statement date, such as a transfer in of your Prudential MPAVC funds.
Finally, please note that projections of your Investment Builder will always be approximate in nature. Even a small change in any of the points above, or in the underlying calculations, can result in a large difference in the value of your Investment Builder at retirement. Predicting future investment growth is complex, and there’s no guarantee that investments will perform as predicted. The projection in your member statement represents our best estimate, based on what we currently know and within the constraints imposed by the SMPI framework, about how your investments might grow up to your Target Retirement Age, whereas the modeller allows you to estimate your benefits under different scenarios and at different retirement ages.