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Barnett Waddingham
0333 11 11 222
Higher Education (HE) institutions are in a period of significant change as new funding regimes and student fee structures have recently been introduced.

The sector also faces a series of concurrent pensions-related challenges and the potential for complicated discussions with staff and a reduction in morale.

Challenges

The main challenges are those arising from the redesign of the nationwide and public sector schemes in use at many institutions such as the Universities Superannuation Scheme (USS) and Local Government Pension Scheme (LGPS).

This leads to the need to train administration staff in the new scheme requirements, amend systems and set up new routines as well as generally increased administration requirements.

Auto-enrolment legislation and requirements to re-enrol employees will have a similar impact on systems and staff, particularly given the quite tricky requirements relating to when the different categories of employees have to be automatically enrolled, or re-enrolled after opting-out.

Controlling costs

Overarching these are the issues of affordability of pensions themselves and increasing employer costs. For universities who are operating their own schemes, the pressure to control costs is just as relevant as in the larger public sector schemes.

We work with our clients to ensure that they understand the risks (and opportunities) that pensions pose to their future financial sustainability and their ability to deliver on their strategic plans. 

Defined benefit schemes

The key financial risk for institutions will be that associated with any defined benefit (DB) schemes.  DB schemes are very complex.  It is not always intuitive how a DB scheme will react in particular financial circumstances, or given a particular change in strategy, and we find our interactive modelling tool Illuminate to be key to ensuring understanding of a given strategy.

Illuminate

Illuminate allows you to model the impact of changing the structure of the scheme such as changing the investment strategy or undertaking ‘liability management exercises’ (such as enhanced transfer values, pension increase exchanges, or annuity purchase); to see how the risk profile is affected, and what the impact is on the contribution rate.

We find this to be an excellent way to ensure understanding of the drivers of change.  This is particularly relevant for any SATs where you have more ability to influence/set strategy, but can also help explain the risks around any wider DB schemes that you participate in (eg USS, TPS or LGPS).

SERVICES FOR HIGHER EDUCATION INSTITUTIONS

Related knowledge and resources

Blogs

  • Picture for Decoding pension scheme benefit design
    Decoding pension scheme benefit design

    Most private sector pensions accrual in the UK is now on a DC basis. When legislators think about DB, it is only to worry about protecting past service benefits; never to wonder about whether the framework for future benefits is fit for purpose.

  • Picture for Don’t give up on USS?
    Don’t give up on USS?

    On Friday 17 November, Universities UK (UUK) said that they want all staff in the Universities Superannuation Scheme (USS) to earn only defined contribution (DC) benefits going forward. Paul Hamilton shares his expertise on the matter.

  • Picture for Understanding risk: our summer project with the University of Liverpool
    Understanding risk: our summer project with the University of Liverpool

    We joined forces with students from the University of Liverpool’s Institute of Financial and Actuarial Mathematics (IFAM) to undertake a research project to understand the way in which the key risks facing the University can be quantified and modelled.

  • Specialist guidance for senior ALMO staff

    Our Executive Pensions team has considerable experience in advising senior ALMO staff on their pension benefits. This briefing note covers substantial changes that have recently taken place in the pensions legislation directly affecting such high-earners.

  • Specialist guidance for senior university staff

    There have been substantial recent changes in pensions legislation affecting high-earners. As a result, senior university staff may now face tax charges on their ongoing pension savings.

  • Specialist guidance for headteachers

    Our Executive Pensions team has considerable experience in advising head teachers and senior staff on their pension benefits. This briefing note covers recent, substantial changes in the pensions legislation directly affecting such high-earners.

  • Sep 12 2019
    Teachers’ Pension Scheme: the Impact on Independent Schools | Amersham

    Following the recent actuarial valuation of the Teachers’ Pension Scheme, from September 2019 independent schools will have to fund significantly higher contributions. Our roundtable (specifically for independent schools) will discuss schools options in detail.

    Location: Barnett Waddingham, Amersham

  • Feb 27 2019
    Webinar - Teachers Pension Scheme (TPS) Valuation: Impact on Employers

    Join Partner and Head of Higher Education; Paul Hamilton as he looks at the recent actuarial valuation of the Teachers’ Pension Scheme (TPS), in particular the impact on independent schools and universities.

    Location: http://bit.ly/TPS-webinar

  • Jul 19 2016
    Webinar - USS from October 2016: Engaging with combined DB and DC pensions

    Are you wondering how to educate and inform your senior staff about the changes to the USS benefits planned in October? Two of our leading experts, Paul Hamilton and Julia Turney are hosting a webinar to help offer some clarity on the changes and complexity that Investment Builder (the new defined contribution section) will bring when it’s launched in October 2016.

    Location: Webinar

  • Picture for University Accounting Survey
    University Accounting Survey

    This is our eighth annual survey of the assumptions adopted by UK universities for determining the value of their pension liabilities for accounting purposes.

  • Picture for University Accounting Survey
    University Accounting Survey

    This is our seventh annual survey of the assumptions adopted by UK universities for determining the value of their pension liabilities for accounting purposes.

  • Picture for University Accounting Survey - July 2014
    University Accounting Survey - July 2014

    This is our sixth annual survey of the assumptions adopted by UK universities for determining the value of their pension liabilities for accounting purposes.

  • Long service and implications on annual allowance

    We were asked to advise a leading University in relation to its senior staff. Particular issues arose with one senior staff member with long service and he had exceeded the Annual Allowance (AA) (£50,000) in each of the last 3 tax years.

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