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Proposed Merger of OUSS with USS. Miles Hedges Finance Director. Agenda. Reasons for the proposal Process Timescales Comparison of the two schemes What happens next? Your questions. Reasons for the Proposal. Benefits for staff Benefits for the University Cost to the University. - PowerPoint PPT Presentation
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8 December 2003 1
Proposed Merger of OUSS with USS
Miles HedgesFinance 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 adviceThis 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 schemesUSS• 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
Annu
al P
ensi
on
OUSS FemaleOUSS MaleUSS 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 FemaleOUSS MaleUSS 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
Ann
ual P
ensi
on
OUSS FemaleOUSS MaleUSS 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
OUSSUSS
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
