USS changes — don’t be fooled

This post is meant for anybody who will be affected by proposed changes to the Universities Superannuation Scheme, the body to which I and many other UK academics have paid our pension contributions and that now proposes to change the rules to deal with the fact that it has a large deficit as a result of the financial crisis. (Or rather, it says it has a large deficit, but there are arguments that the amount by which it is in deficit or surplus is highly volatile, so major changes are not necessarily justified.)

Of course, any change will have to be in the direction of making the deal less generous for those with pensions. Indeed, changes have already been made. Until a few years ago, the amount you got at the end was based on your final salary. More precisely, you got one 80th of your final salary per year after retirement for each year that you contributed to the scheme, up to a maximum of 40 years of contributions (and thus a maximum of half your final salary when you retire). But a few years ago they closed this final-salary scheme to new entrants, because (they said) it had become too expensive. This was partly because now a much larger proportion of academics end up as professors, so their final salaries are higher, and also of course because people live for longer.