The University of Sussex Pension and Assurance Scheme (USPAS) Funding and
Review
Questions and Answers
How will this situation affect me as an USPAS member?
If you are a member of the USPAS scheme, the pension benefits you are entitled to for your
past service (and for service up to July 2008) are protected. The extra funds now being paid
in to the Scheme by the University, and the additional employer contribution we are making
for 2007-08, are designed to ensure the Scheme can meet the cost of those benefits.
For service from 1 August 2008 onwards, we are reviewing future pension provision, and
staff will have the opportunity to contribute to the review. Any changes would be subject to
consultation.
Do I need to do anything in relation to the Scheme now?
No. We are providing these documents for your information, following the decision by the
University at Council on 21 March 2007. No action or decisions are required from USPAS
members at this stage.
As a new member of staff, can I join USPAS?
The USPAS Scheme will remain open for eligible staff to join (ie new staff or staff within the
first six months of their contract) while proposals for future pension provision are being
developed.
There is no entitlement, under scheme rules, for entry to the scheme after the six month
window has expired. The Trustees and the University have agreed that discretion should not
be exercised to permit such entry, unless there are very exceptional individual
circumstances that should be considered.
If I am in receipt of an USPAS pension already, how does this affect me?
This situation does not alter the pension payments being made to former staff in receipt of
USPAS pensions. The extra funds now being paid in to the Scheme by the University are
designed to ensure the Scheme can continue to meet the cost of past service. The review of
the Scheme will also not affect ongoing pension payments.
If I am a USS member does this affect my pension?
The USS scheme is not immune to the investment and cost pressures which affect all
pension schemes and which have impacted USPAS. However, the USS is a separate
national pension scheme and it is not directly affected by the valuation of the USPAS
scheme or the review we will be undertaking locally on USPAS.
Why has the shortfall arisen?
The USPAS shortfall has grown by £11m over the past three years. The factors associated
with this increase are essentially outside the control of the University and include:
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improving life expectancy, outstripping projections made in 2003;
low investment returns relative to past performance, even though there has been
some recovery of the stock market,
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the impact of the national Framework Agreement and recent national pay
settlements, leading to pay rising faster than inflation;
a new legal requirement for pensions to adopt a more prudent approach to valuation.
How will the additional payments affect the wider University?
Due to the way in which payments are accounted for, this situation will not alter the declared
surplus or deficit of the University. We already take account of pension liabilities in our
annual accounts. However, the University will need to find the additional cash flow in the
years ahead to make the required payments.
Could not something have been done sooner?
The University has been vigilant in responding to the needs of the scheme. For example
following the previous three year valuation in 2003, it increased its employer contribution rate
to 19% of salary (leaving employee contribution unchanged). It is now responding to the
latest valuation figures, following proper discussion with the Trustees and external pensions
advisers. However, it is important to note that the national rules for valuations require much
more prudent and conservative assumptions. If the 2006 valuation had been done on the
same basis as 2003, the shortfall would have shrunk to just over £8m.
Why does this £25m gap not require more payments up front?
The benefits for past service reflect all rights that have been built up by all members, which
of course includes costs for people who won’t retire for 10, 20 or 30 years. So these costs
do not arise in full now. However, they require action now to put long-term remedies in
place.
What will happen to the scheme in the future?
The University is not rushing to making decisions on pension provision for future years of
service. Since the University has decided to meet the additional costs of the contributions
required by the current scheme up to July 2008, there is time over the coming year to review
and consult properly on what the best way forward is to be.
How many USPAS members are there?
There are just under 600 members out of 1,100 who could have joined the scheme when
they were appointed to the University.
Who operates the USPAS scheme?
The Scheme is operated separately from the University by a Board of trustees, which is
chaired by an independent member of the University Council, and includes five members
nominated by Sussex, and four nominated by members of the scheme.
March 2007