Additional information has been added to this page (which is all highlighted in this style) to take into account staff feedback from the 'Was this page useful?' feature at the very bottom of the page. Please do continue to leave feedback if you have any feedback, suggestions or queries.
Some of the content on this page was generated with the help of ChatGPT – and carefully reviewed by the Internal Communications team for accuracy and appropriateness.
Thank you to everyone who took the time to respond. One of the actions we’ve identified, in response to your feedback, is to run a series of short articles. Each article will aim to simplify a different aspect of the Universities Superannuation Scheme (USS).
A common theme in the survey feedback was confusion around the terms 'defined benefits' and 'defined contributions'. Many people said they aren't sure what they mean or how they differ.
Here’s a way to think about them that may help.
Defined benefits
When you join USS, you automatically become a member of the Retirement Income Builder – the defined benefit part of the scheme.
This part of USS provides a guaranteed income for life when you retire, plus a one-off, tax-free lump sum (up to a limit).
The benefits you build in this part of the scheme are based on your salary (up to the salary threshold, currently £71,484 – which is subject to change by USS) and how long you’ve been paying in.
When you retire, the amount you receive from this part depends mainly on:
- how long you’ve been a member and actively contributing to the scheme
- your pensionable pay during that time
Pension investment performance is based on a set formula and is more predictable.
This part of the pension is protected by law and is not affected by how investments perform. It provides a secure, stable, reliable income that increases with inflation – making it the most reliable part of your pension.
Defined contributions
If you earn above the salary threshold (currently £71,484 – which is subject to change by USS), you’ll also start building a flexible pot in the Investment Builder – the defined contribution part of USS.
This works more like an account where your contributions are invested.
When you retire, the amount available from this pot depends on:
- how much has been paid in
- how well the investments have performed
You have a few options for using this money, you can:
- take some or all of it as cash (some of it will be subject to tax)
- use it to buy a regular income for life (called an annuity)
- leave it invested and take money out as and when you need it
You can also grow this part of your pension by transferring in other pension savings or paying in additional contributions – this is applicable to all members. This means your USS pension can include both:
- a guaranteed income for life, and
- a flexible pot of savings you can use in a way that suits your retirement plans.
This part of the pension provides a savings pot, and the value of this Investment Builder pot can go up or down depending on market performance so the final value when you retire is not certain.
A simple example]
Many people asked for a real-life example. Here's a basic illustration:
Example
Alex earns £35,000 a year and pays into USS for 20 years. Each year, their pension contribution builds up defined benefits based on their pensionable salary.
After 20 years, this could give Alex a guaranteed pension equivalent to £7,000–£8,000 a year (at current prices, the actual value increases each year by an inflation-linked calculation), plus a tax-free lump sum of around £20,000–£25,000 when they retire (again, this is to indicate the amount at current prices, the actual value increases each year by an inflation-linked calculation).
If Alex’s salary increases to more than the salary threshold of £71,484 during this time, anything above that would go into their Investment Builder (defined contribution) pot – and the value of this when they retire would vary depending on investment performance.
Note:
These figures are simplified and illustrative – actual pension outcomes depend on a range of personal and financial factors.
USS Scheme Rules play the major part in determining pension outcomes.
Who decides how USS changes?
You also asked who governs the scheme and makes decisions about changes:
Universities Superannuation Scheme (USS) is a pension scheme set up under a trust and governed by a trust deed and rules. The USS Trustee carries out actuarial valuations to determine the scheme's financial health at least every three years.
The results of these valuations are shared with the Joint Negotiating Committee (JNC), which uses this information to decide on future benefits and contribution rates. The JNC includes representatives from the Universities and Colleges Employers Association (UCEA) employer group and the University and College Union (UCU) representing members.
The USS Trustee approves any recommendations for change that are made by the JNC. Before any changes are finalised, the USS holds statutory consultations with affected members and their representatives to explain the proposed changes and allow them to provide feedback.
After considering the consultation responses and obtaining Trustee approval, USS communicates the final decisions to all scheme members.
Full details explaining how USS is set up and run are available from the USS website,
Please use the ‘Was this page useful?’ feature at the bottom of the page, to tell us if there is any further information about defined benefits and defined contributions you would find helpful. Please be aware that this feature is anonymous.
Useful USS resources
