The Universities Superannuation Scheme (USS) has confirmed that it will cut both employer and employee contributions rates from 1 January, following the completion of the 2023 valuation.

The scheme previously announced that member benefits would return to pre-April 2022 levels by 1 April 2024, after funding improvements meant that improving benefits to pre-April 2022 levels was “demonstrably sustainable” for at least the next two valuation cycles.

As part of this, it will reinstate the previous accrual rate of 1/75, as well as increase the defined benefit threshold from £40,000 to around £70,000, and remove the 2.5 per cent per annum cap on pension increases before and after retirement.

There will also be an additional one-off pension payment of around £900m to help make good the money members have lost since April 2022.

The changes have now been confirmed following an employer-led consultation, with responses to the consultation "overwhelmingly positive", and no modifications made to the contributions and benefit changes proposed by the Joint Negotiating Committee (JNC).

This means that employee contributions will be cut from 9.8 per cent to 6.1 per cent, providing a £111 post tax monthly saving for a member earning £45,000.

The USS trustee suggested that the cut in pension contributions could also help to address opt out concerns, noting that as a fifth of eligible members opt out of the scheme altogether, and the most common reason for doing so is affordability.

"We hope member contribution rates coming down (from 9.8 per cent of salary to 6.1 per cent, from 1 January 2024) will prompt people to look at whether the scheme now works for them," the trustee stated.

Deeds of amendment for the improved benefits set out in the employer-led consultation, and the one-off uplift to benefits earned between 1 April 2022 and 31 March 2024, are on course to be completed in February 2024 and implemented from 1 April 2024.

The trustee confirmed that the formal valuation paperwork is also set to be filed with The Pensions Regulator, and published on the USS website, in the coming days.

News of the changes was welcomed by the University and College Union (UCU), as general secretary, Jo Grady, argued that it is a "great day for our union, for members of USS, and the whole trade union movement".

"This is a trade union putting money into its members' pockets," she continued. "We now move on and pressure employers who are now making a huge saving on their contribution rates. That money must be used to improve pay and conditions for staff.

"Well done to every UCU member who played their part in getting us here - the bitterly cold picket lines suddenly feel a lot more worthwhile.

"We will take the spirit and example set by this win and seek to apply it right across our union now."

With the 2023 valuation now settled, the trustee also confirmed that it would be turning its attention to the process of reviewing the scheme’s investment strategy, with a formal consultation on the Statement of Investment Principles due to take place in Spring 2024.

"The improvement in the funding position and broadly positive experience since the valuation date – alongside the desire for greater stability – provide us with a greater range of options to consider," an update from the trustee stated.

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