Jackie Grant – UCU pension expert on USS
Surely not, but… astonishingly: yes.
This is because when USS scheme members cease service on any day other than 31 March, USS applies an unusual and little-known mechanism of revaluation.
Instead of granting revaluation in line with the “USS standard pension increase” (which follows the Government Official Increase, based on CPI, with soft-caps on post-2011 accrual), USS applies its own “Rule 10,” which extends the previous year’s CPI up to the leaving date.
So the previous year’s CPI effectively overwrites the CPI of the leaving year up to the leaving date, for potentially an extra whole 12 months beyond its standard application.
This has consequences which are not immediately obvious but can be seen in Figure 1.
Figure 1 demonstrates the consequences of Rule 10: those who retire or defer on any date other than 31 March can see relative losses or gains, sometimes significant, in their accrued pension compared with those who leave on 31 March or remain in service. The loss is especially harsh in years when inflation rises sharply after a low previous year. Members may lose hundreds even thousands of pounds annually, compounding into thousands over retirement.
Importantly, especially for those who have been in Higher Education employment for many years, the losses shown in Figure 1 can be larger than the build-up of new benefits from contributions. Under such circumstances the USS DB pension loses value as a consequence of continuing to accrue benefits.
As an example, take someone very near retirement with annual benefits of £25,000 on 1 April 2022. If they left the scheme on 31 March 2022, they would have received a revaluation of between 7.6%-10.1% on 1 April 2023, making £27,398. But if they left almost a year later, on 30 March 2023, this same April 2023 revaluation would only be 3.1% (the previous year’s CPI), giving £25,775. This person is £1,623 worse off every year in retirement, due to Rule 10, for having remained nearly a whole extra year in the scheme. If they were on a salary of £70k, they accrued £471 in annual DB benefits, much less than their Rule 10 losses. Their DB is over £1,100 a year worse off every year in retirement because they continued to pay USS to accrue DB benefits.
In other words, scheme members would have had a higher DB pension by leaving earlier and not making more contributions. In such situations, not only are employees paying for the privilege of eroding their DB pension, employers are contributing to this as part of the employee remuneration package. See technical working paper for details of these losses. This is not how pensions should work at all.
So USS Rule 10 is clearly unfair, but it is also unpredictable, opaque and unnecessarily complex.
- Members who happen to leave on the “wrong” date, e.g. February 2022, or potentially up to February 2026, suffer permanent erosion of pension benefits from Rule 10 through no fault of their own. This is unfair.
- The scale of the loss cannot be known until the September CPI of the April to March leaving year is published in October of that year. This means it’s also unpredictable.
- USS did not publicly describe this feature until July 2025. Even more astonishingly, what they have been doing, since at least 2016, was not even in the Scheme Rules until they retroactively amended them in May of this year. So it’s opaque.
- Unlike public sector DB schemes, which apply the annual rate of CPI, following the Government Official Increase, USS uses an overwriting mechanism to award an out-of-date CPI, on the leaving date, to that first part of the year. Then applies the correct CPI, at the next April, but only to the remaining second part of the year. Either way, the USS method is convoluted and difficult for members to anticipate or understand. It is unnecessarily complex.
The impacts are serious. Between 2016 and 2023, roughly 90,000 members were affected, with estimated losses of around £150 million relative to the USS standard pension increase. Some, e.g. those ceasing service at the start of 2022, would have received a 5-7% reduction to their benefits. Current Bank of England forecasts suggest that members leaving between 1 April 2025 and 30 March 2026 may lose proportionally up to 2.3% on all prior accrual.
Importantly, this is then baked in, so their pension will suffer the same percent loss each year in retirement relative to the standard pension increases.
The system is not only unfair, unpredictable, opaque and unnecessarily complex, but also carries potential equality impacts, disproportionately affecting those on reduced hours.
How can members find out if they might be impacted on ceasing service?
This is a very good question. One might expect that USS would have a simple news update, fact sheet or calculator where members could estimate how they might be impacted.
But no, no such things exist. Instead members need to somehow know about, then wade through, three unannounced USS updates of July 2025 (i) How revaluation works while…an active member, (ii) USS guidance for Independent Financial Advisors and (iii) USS scheme Rules.
To try to help scheme members make sense of these updates, the trade union UCU issued communications in August on Active and Proportionate Revaluation, explaining the issue, the work UCU is doing, where to get support from USS on understanding the range of factors that impact on benefits and how to access independent financial advice.
Sarah Joss, previous UCU negotiator, has, with me, posted two blogs that try to explain how USS revaluation works: The USS Hangover Revaluation, or why Rule 10 will cause some members a long lasting headache.
There is also a technical working paper by me to inform a review of USS revaluation: Draft analysis of USS pension revaluation: losses from timing of deferring or retiring, the lag and implications for Conditional Indexation.
As the UCU update says, there is work to review this USS Rule 10 revaluation, but wider conclusions are clear: USS and employers’ representatives UCEA must acknowledge the problem and act. At a minimum, they must communicate transparently with members about the risks of Rule 10 to ensure members can make informed decisions. They should work with UCU to explore an underpin for those who have already suffered losses, and those who will potentially suffer losses in the future until this issue is fixed.
The wave of redundancies sweeping Higher Education, means many USS members have little choice about when (or if) they leave, making clear communication especially important now.
Without reform, USS members face continued arbitrary erosion of pension benefits, tied not to their contributions or service, but to an accident of the calendar.
I am a Senior Teaching Fellow in Physics at the University of Sussex, a USS scheme member and an elected UCU USS negotiator. With thanks to former negotiators Sarah Joss and Mike Otsuka for extremely helpful discussions and comments.