Representatives of employers and participants associated with the £56 billion ($77.6 billion) Universities Superannuation Scheme, Liverpool, England, agreed to proposed changes to the retirement plan.
Universities U.K., representing the views of more than 350 higher education employers, and the University and College Union, representing participants, together form the Joint Negotiating Committee for USS and decide changes to rules governing the plan.
The JNC has been discussing potential changes to the retirement plan's future structure and said in a notice Wednesday on the USS website that a vote resulted in an agreement to carry forward proposals by Universities U.K.
The proposed changes, which are subject to a statutory consultation by employers with all affected employees starting in March, would come into effect no sooner than April 1, 2019. They would only apply to benefits accrued from that point onward by participants currently active in the plan.
On April 1, 2019, the pension plan would be frozen. Currently, participants' first £55,000 of salary is eligible for defined benefit plan benefits, with any further contributions applied to a new defined contribution plan, the USS Investment Builder.
Future benefits will be directed to the USS Investment Builder. Participants would continue to contribution 8% of salary to the plan but will also have access to a lower-cost option of contributing 4%. Both options will see participants receive the full employer contribution into the DC plan of 13.25%. Also under the agreed proposal, the additional 1% employer match that is currently available will be discontinued from the date at which the changes take effect, said the notice.
The proposals follow prudent funding assumptions set by the trustee board in November, which showed that maintaining the current level of benefits would require a combined employer and employee contribution rate of 37.4% of pay. The current contribution rate totals 26%, split 18% employer and the remaining 8% contribution by the participant. The employer contribution includes funding to erase the pension deficit.
The agreed proposal "is a necessary step to put the scheme on a sustainable footing for the long term," said a statement in a separate news release by Universities U.K. "Our focus now is to work with USS and UCU to shape the details of the new benefit structure so that it offers flexibility, choice and market-leading defined contributions pensions."
The consultation period with participants is expected to run for 60 days.