The Universities Superannuation Scheme’s (USS) surplus has increased to £9.2bn, as at 31 March 2024, the scheme’s latest annual report and accounts has revealed.

The report showed that the USS’s total assets under management were £77.9bn, while the value of the defined benefit (DB) fund in particular stood at £74.8bn, against estimated liabilities of £65.6bn, meaning that the scheme was 114 per cent funded.

This also marked a £1.7bn increase in the value of the DB fund over the year to 31 March 2024, after “strong” performance in equity markets across the globe, despite ongoing inflation concerns.

The USS also acknowledged out that while credit markets displayed positive performance over the year, the rising interest rate environment proved to be a drag on government bonds.

However, it confirmed that the estimated value of USS’s DB liabilities continued to fall "materially", with the scheme outperforming its DB liability proxy by 10.8 per cent per annum over the five years to March 2024, and by 5.6 per cent per annum over 10 years.

The trustee also completed the USS’s latest actuarial valuation during the reporting period, completing the valuation ahead of the statutory deadline thanks to an accelerated timetable, with the scheme formally reporting its first surplus since 2008.

These funding improvements allowed the scheme to cut member contributions from 9.8 per cent of pay to 6.1 per cent in January 2024, while employer contributions were cut from 21.6 per cent of payroll to 14.5 per cent.

Member benefits were also restored to pre-April 2022 levels in April 2024, with a one-off uplift also applied to benefits earned between 1 April 2022 and 31 March 2024.

In addition to the DB improvements, the report showed that, compared with the prior year, this was a more favourable period for DC investments across the industry, with the scheme’s DC funds recording “strong” returns over the 12 months to 31 March 2024.

Furthermore, most of the self-select funds matched or outperformed their respective benchmarks over the period.

USS’s report also looked to highlight the cost benefits of the scheme’s in-house approach to its investments, with analysis from CEM Benchmarking estimating that the scheme’s annual investment management costs were the equivalent of £121m.

The scheme also published its latest Task Force on Climate-related Financial Disclosures (TCFD) Report alongside the annual report and accounts, confirming that the emissions intensity of USS’s non-sovereign investments is now 39 per cent lower than its 2019 baseline, ahead of its 2025 interim net-zero target.

Commenting on the update, USS Trustee Board chair, Kate Barker, said: “As we enter USS’s 50th anniversary year, I am pleased to report that the scheme is in good health – with a growing membership, an estimated surplus, lower contributions, and improved benefits.

“We are grateful to UCU and UUK’s representatives on the Joint Negotiating Committee for their hard work on the 2023 valuation, and for working together effectively for the benefit of members. We are determined to keep working closely with our stakeholders to ensure USS can continue to thrive for the next 50 years, and beyond.”

Adding to this, USS chief executive, Carol Young, said: “The past year has not been without its challenges – notably, the Capita data breach and our investment in Thames Water – and it’s important we learn from those experiences.

“The scheme’s overall direction of travel heading into its 50th year is, however, really encouraging: member and employer perceptions are improving, we’ve again achieved customer service excellence accreditation, good progress is being made in respect of our net-zero ambition, and our in-house investment team has delivered positive returns at a notably lower cost than its peers.

“We continue to promote the unique features of open, multi-employer DB schemes like USS in respect of the regulatory framework.

"We have been engaging with government on our ability to invest at scale in productive assets. And we are working with our stakeholders to consider ways we can put the scheme on a more stable footing for the future.”

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