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8 December 2003 1
Proposed Merger of OUSS with USS
Miles Hedges
Finance Director
8 December 2003 2
Agenda
• Reasons for the proposal
• Process
• Timescales
• Comparison of the two schemes
• What happens next?
• Your questions
8 December 2003 3
Reasons for the Proposal
• Benefits for staff
• Benefits for the University
• Cost to the University
8 December 2003 4
Benefits for Staff
• One scheme for everyone
• Eliminates the promotion problem
• Allows staff greater mobility between universities
• Provides security of a national pension scheme
8 December 2003 5
Benefits to the University
• Greater stability of its future pension contributions
• Greater stability of its reported pension costs
• Remove administrative burden of dealing with more than one pension scheme
8 December 2003 6
Cost to the University
• The University is willing to pay a premium in order to achieve the benefits for staff and itself
• There is a limit to the amount of the premium that can be afforded
8 December 2003 7
Process
A long and complex process, involving:• The University Council – merger approved in principle
up to a given financial cost
• USS Trustees – the merger process and template has already been approved in principle
• OUSS Trustees – have to be satisfied that the merger is in the best interests of members
• OUSS Members – have to be satisfied that the merger is in their best interests
8 December 2003 8
Process
• Discuss proposals with trade unions
• Put project team in place• Inform staff – including this meeting
• Negotiate terms with USS• Take legal advice – both University and OUSS Trustees
• Take actuarial advice
This is a long and complex process
8 December 2003 9
Timescales
• Sep 2003 – Council decision in principle
• Oct 2003 – commenced discussions with trade unions
• Nov 2003 – project team formed; letter to all staff in OUSS
• Dec 2003 – open meeting for all staff; discussions with USS
• Jan 2004 – continued consultation with staff
• Mar 2004 – target date to agree principles of merger
• Jul 2004 – target date to complete merger if terms and financial conditions are right
8 December 2003 10
Comparison of the two schemes
USS• National scheme• Security based on HE
sector as a whole• Retirement age 65• Option to retire from
active service at 60
OUSS• Local scheme• Security depends on
a single employer• Retirement age 65• Option to retire from
60
8 December 2003 11
Comparison of the two schemes
USS• Pension = 1/80th of
salary for each year of service PLUS
• Lump sum of 3/80th of salary for each year of service
• Can convert lump sum into pension
OUSS• Pension = 1/60th of
salary for each year of service
• Can convert pension into lump sum up to Inland Revenue limit
8 December 2003 12
Comparison of the two schemes
USS• Dependent’s pension =
1/160th for each year of service
• Lump sum death in service benefit = 3 x salary
• Ill health pension = full service to normal retirement date
OUSS• Dependent’s pension =
1/120th for each year of service
• Lump sum death in service benefit = 2 x salary + refund of contrib’ns
• Ill health pension = service to date + 5 years
8 December 2003 13
Comparison of the two schemes
USS• Employee’s
contribution = 6.35% less tax relief
• Maximum pension increase = RPI increase
OUSS• Employee’s
contribution = 6.00% less tax relief
• Maximum pension increase = RPI up to a maximum of 5% in any one year
8 December 2003 14
UK INFLATION RATE: 1948 to 2003
-5
0
5
10
15
20
25
30
Jan-48 Jan-58 Jan-68 Jan-78 Jan-88 Jan-98
Date
%
UK INFLATION RATE
8 December 2003 15
Pension After 10 Years at Varying Inflation Rates
£0
£5,000
£10,000
£15,000
£20,000
£25,000
2.50% 5% 10%
Annual Inflation rate
Ann
ual P
ensi
on
OUSS Female
OUSS Male
USS Both
8 December 2003 16
Pension After 10 Years at Varying Inflation Rates
£0£2,000£4,000£6,000£8,000
£10,000£12,000£14,000£16,000£18,000
2.50% 5% 10%
Annual Inflation Rate
Ann
ual P
ensi
on OUSS Female
OUSS Male
USS Both
8 December 2003 17
Pension After 10 Years at Varying Inflation Rates
£0£2,000£4,000£6,000£8,000
£10,000£12,000£14,000
1 2 3
Annual Inflation Rate
An
nu
al P
ensi
on
OUSS Female
OUSS Male
USS Both
8 December 2003 18
Spouse's Pension After 10 Years at Varying Inflation Rates
£0
£1,000£2,000
£3,000£4,000
£5,000£6,000
£7,000
1 2 3
Annual Inflation rate
Ann
ual P
ensi
on
OUSS
USS
8 December 2003 19
Comparison of the two schemes
• Merger is the last stage in a long process• Many changes have been made in the
past to bring benefits together – generally these involved increasing OUSS benefits but not always
• Remaining changes involve some measure of trade-off – in the same way as buying an insurance policy buys peace of mind if things go against you
8 December 2003 20
What happens next?
Communication plan:• Letter to you• Today’s meeting• Your questions and our responses• Regular progress reportsKey dates:• March – agree merger principle• August – start of your USS membership
8 December 2003 21
Your Questions
• To the panel now – Philip Marsh, Joe Devlin & Miles Hedges
• Information and questions and their responses will be posted on Personnel intranet
• Email to [email protected]
• To your trade union representatives
