How far USS has fallen from past parity with public sector pensions

Graph by Jackie Grant

1. USS before (blue) and after (yellow) the UUK cuts*

The shortfall of the yellow line, relative to the blue line, shows how much less of an annual pension a 40-year-old USS member earning £40k can expect in retirement in exchange for contributions this year, as compared with contributions paid in 2021–22.

2. USS versus TPS (green)

The comparison with the Teachers Pension Scheme (TPS), in which university lecturers in the post-92 sector are enrolled, is the most striking. As the green line indicates, a 40-year-old post-92 lecturer earning £40k is promised a pension of £1050 per annum in exchange for the same 9.8% member contribution as a USS member. That’s nearly 2.5 times greater than the current USS pension on the assumption that inflation will run at 2.5% and nearly 3 times greater if inflation runs at 3%.

3. USS versus LGPS (orange)

In response to unfavourable comparisons between USS and TPS, attention is often drawn to the fact that the latter is an unfunded pay-as-you-go (PAYG) scheme, whereas USS is funded. Some maintain that a funded scheme is more intergenerationally fair than a PAYG scheme, since members and their employers fully fund member pensions out of contributions plus returns on the financial assets into which they’re invested. By contrast, it is claimed that the generous accrual rate of TPS has the upshot that future taxpayers will be forced to subsidize the pensions promised to teachers and post-92 lecturers.

Appendix

1. Link to spreadsheet which contains the underlying formulas and assumptions which generated the above graph:

Graph by Jackie Grant

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Michael Otsuka

Michael Otsuka

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Professor of Philosophy, Rutgers. Previously on UCU national negotiating team for USS pensions.