Q & A for UASLAS and USS
USS pensions transfer
This series of Questions & Answers has been prepared for members who have been given the choice of joining USS instead of UASLAS. Many of these questions were raised during the staff meetings held on 22 August 2006. This announcement has been prepared by the University following consultation with their advisers, Watson Wyatt, and the Trustees of UASLAS. This should be read in conjunction with the Comparison of Benefits information sheet distributed with your offer letter. This announcement is provided for information purposes only and should not be regarded as providing any form of financial advice. The benefits of the two schemes are detailed in their respective rules which will prevail in any case of inconsistency or omission. Individuals considering changing pension schemes are encouraged to seek independent financial advice before reaching a decision.
What is USS?
The Universities Superannuation Scheme is a nationwide pension scheme for academic and related staff in the Higher Education sector. There are around 200,000 members of USS.
What is UASLAS?
The University of Aberdeen Superannuation & Life Assurance Scheme is the pension scheme offered by University of Aberdeen for its employees who are not eligible for membership of USS. Its benefits are very similar to those provided by USS
What has changed?
The Framework Agreement, which took effect from 1 August 2006, means that eligibility for USS is open for staff on Grades 5 and above. This means that existing members of UASLAS who have been graded 5 or above have become eligible to join USS. However, under transitional arrangements agreed at national level and ratified locally, affected University staff have the one-off right to remain in UASLAS.
What are the choices?
- Remain in UASLAS
This means you will continue as a member of the local scheme “clocking up” additional years of service. When you eventually leave service your UASLAS entire benefits will be calculated using your Final Pensionable Salary at that time.
- Join USS for the future only
This means, with effect from 1 August 2006, you will become a new member of USS. Your existing benefits under UASLAS will be calculated as if you had left service on 31 July 2006, revalued between then and your retirement by the increase in price inflation.
- Join USS for the future and transfer UASLAS benefits into USS
This is similar to the second option except you will have consolidated your benefits from one source.
What are the key differences in the benefits provided by UASLAS and USS?
A Comparison of Benefits table was included in the previous communication. There are however key differences between the two schemes.
- Under USS, members contribute at the rate of 6.35% of Pensionable Salary. Under UASLAS, the rate is 7.05%.
- Under USS, pensions in retirement increase in line with RPI inflation. Under UASLAS the same increases apply, but subject to a minimum of 3% a year.
- The early retirement terms offered under the two schemes differ.
In 2005, the University agreed with the UASLAS members to increase their contributions to the rate set out above. Part of the reason for the difference in the rates was the retention of the 3% minimum pension increase.
Under option 3, will I get year-for-year service on transfer to USS?
This is unlikely. The calculations for transferring will take account of the fact that you have left UASLAS service. Your service is likely to be scaled down as your benefits in USS will depend on your salary in the years leading up to when you leave University service and, depending on when you joined UASLAS, the USS benefits will be subject to different early retirement terms. In addition the amount charged by USS for providing each year of service under the Harmonisation arrangements is greater than the amount available for transfer from UASLAS.
Can I obtain a quotation for the service?
If you would like a quotation you should request one from Michelle in the Pensions Office. Michelle can be contacted on firstname.lastname@example.org or on 01224 272289. You should bear in mind, however, that the quotation process is fairly time consuming so the results might only be available in three to four weeks. As described in the previous question, it is unlikely that you will receive a year-for-year service credit in USS.
Under option 1, how long can I remain in UASLAS?
You will be allowed to remain in UASLAS for as long as you remain on your new grade. If you are promoted to a higher grade, you will then be obliged to join USS for future service. You will also be given the option at that time to transfer your accrued UASLAS benefits over to USS under the terms of the public sector Transfer Club, provided it remains in force unchanged. This arrangement generally provides year for year service where the schemes are similar, although the number of years given in USS service will be scaled down where you do not have an automatic right to retire at age 60. For UASLAS members this will depend on your service as follows:
- For those members, active at July 1994:
- Males: service completed after 17 May 1990 will be provided on a year for year basis in USS. Service completed before that date will not be provided on a year for year basis as men had a normal retirement age of 65 at that time.
- Females: service will be provided on a year for year basis.
- For those members who joined UASLAS after July 1994:
- Males and females: service will not be provided on a year for year basis as the normal retirement age is 65.
Please note that, even where year for year service is awarded, there may be a small difference in the service awarded due to rounding in the calculations. Note also that the scaling down described above which applies for members with a normal retirement age of 65 will not be as significant as the scaling down that is likely to apply under Option 3 described earlier in this paper.
Do deferred members get the same early retirement terms as actives (ie are they still able retire at 60 with no reduction to their pension and lump sum)
Deferred members are individuals under Option 2 who leave UASLAS and retain their benefits in UASLAS. Active members are individuals under Option 1 who continue to contribute to UASLAS.
- For those members, active at July 1994:
- Deferred males: benefits earned after 17 May 1990 are payable from age 60 without reduction. Benefits earned before that date would be reduced if taken at age 60.
- Active males: benefits earned after 17 May 1990 are payable from age 60 without reduction. Benefits earned before that date would be payable from age 60 without reduction if the University consents to their retirement.
- Active and deferred females: benefits are payable from age 60 without reduction.
- For those members who joined UASLAS after July 1994:
- Active members: benefits are payable from age 60 without reduction if the University consents to their retirement and they have at least five years UASLAS service
- Deferred members: benefits would be reduced if taken at age 60.
Please note, the University cannot guarantee in advance whether or not it will consent to a particular request to retire.
What happens with Bonus Credits?
Note: This question only affects approx. 40 female members of the scheme who joined before August 1994. Letters were sent to these members in September 2004 reminding them of their bonus credit.
A Bonus Credit of up to 5 years was given to some females between 1963 and 1994 when scheme joining age was 24, as men could accrue 40 years at retirement, women couldn't as their retirement age was 60. Bonus credit is pro-rated if member leaves UASLAS before 60
What happens to AVC benefits accrued in UASLAS and transferred to USS under Option 3?
These will be transferred over to USS along with your other UASLAS benefits.
Money Purchase AVCs will be transferred to the equivalent AVC arrangements under USS.
When your total UASLAS service is calculated it will include the main scheme service, any added years AVC service purchased and any transferred in service. As stated above it is unlikely that you will credited on a year for year basis in USS.
Are my pension benefits “guaranteed”?
This answer applies equally to USS and UASLAS.
Employers are not allowed just to “walk away” from their pension promises. In order to do this, the University would need to secure in full the accrued benefits with an insurance company. Buying insurance policies in this way is expensive because insurers need to take a very cautious view and to make a profit.
If the University was not able to meet these premiums, there is now a “safety net” the Pensions Protection Fund or PPF. The PPF provides compensation to the members of “failed” pension schemes.
Will the University continue UASLAS indefinitely?
As mentioned, the University is legally obliged to provide for accrued benefits and is not allowed to reduce them. However, the University has the right to amend benefits that accrue in future and the contributions that members pay. If the University wished to do this it would be obliged to obtain the consent of the Trustees and, in some circumstances, to consult with the employees affected. The same applies to USS. There is no guarantee that the Higher Education sector will not agree to amend benefits that accrue in future.
If a significant number of staff transfer from to USS, will UASLAS remain viable?
Yes. The finances of UASLAS are not seriously affected by a drop in the number of employee members.
UASLAS has funds of some £70 million. At any time the aim of the Trustees and the University is to ensure that the fund is deemed sufficient to meet the pensions that will be paid out to the members in the future. Most of the contributions currently being paid to UASLAS are being used to build up additional benefits for the current members. If there are fewer members this also means that lower benefits are being built up. As stated above the University has a legal commitment to maintain the Scheme to ensure that all accrued benefits are paid in full.