Download - Proposed Merger of OUSS with USS
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8 December 2003 1
Proposed Merger of OUSS with USS
Miles HedgesFinance Director
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8 December 2003 2
Agenda
• Reasons for the proposal• Process• Timescales• Comparison of the two schemes• What happens next?• Your questions
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Reasons for the Proposal
• Benefits for staff• Benefits for the University• Cost to the University
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Benefits for Staff
• One scheme for everyone• Eliminates the promotion problem• Allows staff greater mobility between
universities• Provides security of a national pension
scheme
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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