The UK’s biggest DB scheme faced a range of challenges when introducing DC to the higher education sector

The Universities Superannuation Scheme has just launched a DC section, USS Investment Builder, as part of their new active hybrid arrangements. How did the scheme go about designing this new section, what challenges has it faced, and what has it revealed about member engagement and behaviour?

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USS is the largest pension fund in the UK. While there was some disappointment around the closure of the final salary pension scheme, many members were also understanding of the move to DC, according to Mel Duffield, head of product strategy and liaison at the USS. 

Duffield outlined the findings of a member survey, saying that 69% expected their USS pension to be their main retirement income, and 62% had a cautious attitude to risk. 

Furthermore, members stated that they didn’t want to be overwhelmed by too much choice, many didn’t feel comfortable with making investment decisions, and some were concerned about charges. 

The new arrangements 

  • For the first £55,000 of salary, members contribute 8% into the career average USS Retirement Income Builder
  • Their employer will pay in 18%
  • Above the £55,000 threshold, members automatically contribute 8% into the USS Investment Builder, the new DC section.
  • 12% of the employer’s 18% contribution above this threshold goes into the USS Investment Builder
  • All staff can also make further DC contributions, matched by their employer

With many members not joining the Investment Builder until the age of 40 or 50, the new default has been designed to avoid de-risking too soon, while there is also a fund choice for members, as well as an ethical lifestyling fund.

Having launched the scheme at the beginning of October, Laura MacPhee, product strategy and liaison analyst at the USS, went on to explain the scheme’s objectives: to drive action among members and to encourage them to take up the 1% employer match. Importantly, they also aim to make sure that members understand their target retirement age, as well as the interaction of DB and DC, and risks around fund choices.

To fulfil these objectives, USS is implementing a multi-channel engagement strategy: using emails, videos, nudges, personas, seminars and webinars. A series of presentations around the country have been well-received by members. 

So far, the target of 20% registrations has been hit, and 10,000 members are currently making active investment choices. 

MacPhee said the scheme would evaluate the programme over coming months, as the scheme beds in. At that point, USS will be asking various questions to measure success: 

  • Are members taking up the 1% match?
  • Are they making appropriate investment decisions?
  • Is there equal access?
  • Are members registering on and engaging with My USS?
  • Do they understand how USS Investment Builder works? 

As the scheme settles into place, their next steps will be a continued drive of member engagement and more member segmentation to ensure that all employees are getting appropriate choices and communications. 

So far, both Duffield and MacPhee are enthusiastic about the scheme’s impact – and as USS heads into 2017, they will prioritise continuous monitoring of the scheme to ensure success in its first year.