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From TPS to USS – is now the time to move pension scheme?

by John Ingoe

Amid increasing financial pressures, a number of universities are considering a move from the Teachers’ Pension Scheme (TPS) to the Universities Superannuation Scheme (USS) for their teaching staff. In this blog post, I take a deep dive into each scheme to explore whether this makes sense.

On the surface, moving university teaching staff from the TPS to the USS seems rational. USS employer contributions are currently 14.5% of salaries, compared with a TPS employer rate of 28.68% of salaries. Even if we also allow for differing benefit structures, we can say that both offer valuable Defined Benefit (DB) pensions. But is cost the only consideration? In this blog post I will argue that it is not…

How USS and TPS work

Let’s take a step back and consider how each scheme operates. While both are DB in nature, they are fundamentally different beasts.

USS – an overview

USS is a multi-employer, private sector, funded hybrid scheme – meaning that it offers both DB and Defined Contribution (DC) benefits – and is managed by trustees. It currently provides members with a DB pension of 1/75th of salary (plus a lump sum of 3/75th) up to the salary threshold, as well as DC benefits on salary above that level.

The contributions paid by both employers and employees are invested, and pensions are paid out of the assets held. Under funding regulations that apply to the scheme, the trustee carries out a funding valuation every three years, or more quickly if needed, with the next one due as at 31 March 2026.

The results of those funding valuations determine the employer and employee contribution rates that will be paid between each valuation cycle – although the process isn’t quite as straightforward as that suggests. The 2026 valuation will determine the contribution rates payable from 2027; these will be reviewed again following completion of the 2029 valuation.

TPS – an overview

TPS is a public service, unfunded, pay-as-you-go DB scheme. It offers members a DB pension of 1/57th of salary. Contributions paid by employers and employees are used to pay current pensioners, with HM Treasury meeting the balance.

TPS isn’t governed by the same funding regulations as USS, but a funding valuation is carried out every four years, in a similar way to USS.

These valuations determine the employer contribution rate. The next valuation is due with an effective date of 31 March 2024 (yes you read that right), with the results of that valuation likely (but not certain) to result in changes to the employer contribution rate from 1 April 2027.

A brief history of the USS

Volatile contribution rates, benefit changes and industrial action

Since April 2016, USS has experienced repeated shifts in contribution rates and benefit design, with the latter often used as a lever to mitigate the former. Employer and member contribution rates rose between 2016 and 2023, before falling significantly in 2024, as shown below:

Effective dateEmployer rateMember rateTotal
April 201618.0%8.0%26.0%
April 201919.5%8.8%28.3%
October 201921.1%9.6%30.7%
October 202121.4%9.8%31.2%
April 202221.6%9.8%31.4%
January 202414.5%6.1%20.6%

However, the above table somewhat downplays both the impact of the 2020 valuation and the contribution rate increases that would have occurred had significant changes to benefits and the valuation methodology not been made. The schedule of contributions dated September 2021 would have seen contribution rates increases to 38.2% of salaries for employers and 18.8% of salaries for employees.

In the end, benefits were reduced to avoid this. From April 2022, this resulted in:

  • A lower rate of future pension build-up
  • A reduced salary threshold, which determines the split of DB and DC benefits earned
  • Capped inflation protection.

The outcome of the 2020 valuation was not particularly well received by either members or employers. The majority of these changes were reversed in 2024.

Impact of financial markets on USS

The USS employer rate is essentially determined by the size of any funding shortfall or surplus, and the cost of future benefit accrual. Changes in the value of pension scheme liabilities and the cost of future benefits are driven by changes in financial markets, and in particular bond yields. Changes in asset values depend on the actual assets held, and these will often move in different ways from the liability value. There can be significant swings in the funding position as a result of this mismatch.

This volatility was demonstrated in the valuations carried out between 2018 and 2023. A funding shortfall of £3.6bn in 2018 increased to £18.4bn in 2020 but then flipped to a surplus of £7.4bn in 2023. These changes were predominantly driven by unprecedented changes in bond yields, which went from c1.7% (2018) down to c0.7% (2020), and then up to c3.8% (2023).

While there were several second order changes (changes to demographic assumptions; changes to the funding target; member experience; asset performance), these tended to be drowned out by the impact of changing bond yields.

A brief history of the TPS

Sharply increasing contribution rates

TPS employer rates have risen sharply since 2019, as shown below:

Effective dateEmployer contribution rate
September 201516.48%
September 201923.68%
April 202428.68%
April 2027Next scheduled change

Since 2019, the TPS employer rate has increased by almost 75%. For many employers (including local authority-maintained schools and academies), grant mechanisms have largely cushioned these increases. Our understanding is that post-1992 universities have not been insulated, prompting difficult strategic choices.

While the employer rate has risen significantly, member rates have remained broadly stable over that period, increasing by around 0.3% of salaries.

Impact of lower expectations of economic growth on the TPS

Pension valuations estimate the size and timing of future pension payments using financial and demographic assumptions. Those future payments are then converted to a present value using a discount rate – which can be thought of as an advance allowance for expected long‑term investment returns.

“I thought the TPS held no assets,” you say. Well, you’d be right. But there is a notional pot of assets, as well as a notional shortfall to be made good. That may be one for another blog, but it does underline that the discount rate remains a key assumption.

A lower discount rate means more money must be set aside today, making pension costs more expensive. Even relatively small movements in the discount rate can have a big impact on contributions. For unfunded public service schemes such as the TPS, the discount rate is the SCAPE rate (Superannuation Contributions Adjusted for Past Experience) – which is linked to long‑term UK GDP growth, as forecast by the Office for Budgetary Responsibility (OBR).

As long‑term GDP forecasts fell over the past decade, the SCAPE rate also fell. This has been the principal driver of higher TPS employer contribution rates, outweighing the impact of other valuation assumptions.

How costs might change in the future

In both schemes, contribution rates are determined by factors beyond the control of sponsoring employers. The table below sets out the key influences on the costs of each scheme:

DriverTPSUSS
Economic assumptionsCosts are driven by the SCAPE discount rate, which is linked to long-term UK GDP forecasts.Liability values can be sensitive to long-term bond yields and inflation expectations.
Investment performanceNo impact as TPS holds no assets. Its notional pot of assets increases in a prescribed way.USS investment performance directly affects funding position. It can move differently from liabilities.
Benefit designBenefits are set out in legislation. Short-term changes are unlikely.Benefit structure directly affects cost of accrual. Changes have been made to avoid large contribution increases.
Demographic trendsLongevity and other member behaviours influence valuations.Longevity and other member behaviours influence valuations.
Regulation and governanceKey valuation assumptions are set by HM Treasury, and are potentially subject to political influence.Valuations must reflect regulatory expectations and employer covenant considerations.

Key drivers of the TPS

The key driver of the TPS contribution rate is the SCAPE discount rate. The current SCAPE methodology based on the GDP approach was introduced in 2011 and reviewed ten years later, as scheduled, during the last completed valuation cycle. This framework remains in place unless HM Treasury directs otherwise.

While recent headline GDP growth has been modest, it’s the long‑term GDP forecasts that determine the SCAPE rate. The OBR’s long‑term projections (published in July 2025) show a material improvement compared with those underpinning the current 28.68% TPS employer rate.

If this improved outlook persists, the SCAPE discount rate will rise (potentially materially) and, all else being equal, from April 2027, the TPS employer rate will go down (potentially materially).

So, all else being equal, we might expect the TPS employer rate to fall from its current rate in 2027. But that’s not guaranteed – “all else being equal” is doing a lot of heavy lifting here, and almost never turns out to be the case.

Other valuation assumptions – including salary growth, inflation, longevity and scheme member behaviour – will also influence the result. Perhaps more importantly, long-term GDP forecasts can change – reflecting changing views due to macroeconomic factors or political pressures. And finally, there is still scope for HM Treasury to tweak the SCAPE rate methodology.

Until the HM Treasury valuation direction is published, nothing is set in stone

Key drivers of the USS

There are more moving parts driving the USS employer rate than there are in the case of TPS. Asset performance, changes in long-term bond yields, covenant strength and benefit changes can all alter employee and employer rates. And while past performance is not an indication of the future, we only have to look back to the 2020 valuation to see the possibility of the employer rate exceeding 30% of salaries.

While we don’t expect to see material changes following the 2026 valuation, there are no guarantees that this will continue to be the case after the 2029 valuation. USS continues to invest heavily in growth assets, so some volatility is to be expected. While the expectation is that these assets will provide higher returns in the long term, a valuation is a snapshot of a moment in time, and a 31 March valuation date often coincides with some financial shock or other.

USS also operates in a regulatory environment that pushes DB schemes to link liability measurements to bond prices. This can result in a funding position (assets v liability value) that can move materially, and any deficit arising from that is likely to result in increased contributions. UCU and UUK are working with USS to put in place a valuation methodology which looks to mitigate this volatility, but this may only soften, rather than remove, future swings in position due to changes in financial markets.

Finally, the higher education sector is facing more financial pressures than ever before. All else being equal, this could lead to a stronger funding target (and therefore increased contribution rates).

Which is better – TPS or USS?

It depends.

Each employer faces a unique set of challenges, and appropriate pension strategies will vary. As with any decision about pensions, it’s about balancing risk and reward. There’s a definite short-term gain for employers from moving to USS (all else being equal), but scheme costs will vary over time. USS may be more cost-effective now, but that may not always be the case. There are signs that the TPS employer rate could fall from 2027 (potentially materially), while costs and benefits in the USS are intrinsically more volatile due to the different funding approach.

In any case, it’s not enough to simply compare the cost of the two schemes. Each offers a different level of benefits for members, at a different cost to members, and with a different perceived value for members.

All in all, not a straightforward decision and one that requires a lot of consideration.

John Ingoe is an Associate Partner and Head of Employer Actuarial Services at First Actuarial, a Gallagher Company. He has over 18 years’ experience working with employers such as higher education institutions and other not‑for‑profit organisations. He helps them meet strategic pension challenges including defined benefit scheme funding, multi‑employer pension arrangements and complex pension change projects. www.firstactuarial.co.uk. john.ingoe@firstactuarial.co.uk


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Surviving and thriving in HE professional services

by GR Evans

This blog was first published in the Oxford Magazine No 475 (Eighth Week, Hilary term, 2025) and is reproduced here with permission of the author and the editor.

Rachel Reeds’ short but comprehensive book, Surviving and Thriving in Higher Education Professional Services: a guide to success (Routledge, 2025), is both an instruction manual for the ‘professionals’ it was written for and an illuminating account of what they do for the academics and students who benefit. However, Reeds is frank about what is sometimes described as ‘trench warfare’, a ‘tension’ between academics and ‘everyone else’, including differences of ‘perceived status’ among the staff of  ‘higher education providers’.

Her chapters begin with a survey of the organisation of ‘UK higher education today’. Then comes a description of  ‘job or career’ in ‘professional services’ followed by a chapter on how to get such a post. Chapter 4 advises the new recruit about ‘making a visible impact’ and Chapter 5 considers ‘managing people and teams’. The widespread enthusiasm of providers for ‘change’ and ‘innovation’ prompts the discussion in Chapter 6.

Reeds defines ‘Professional Services’ as replacing and embracing ‘terms such as administrators, non-academic staff or support staff’. In some providers there are not two but three categories, with ‘professional services’ sometimes described as ‘academic-related’ and other non-academics as ‘assistant’ staff. Some academics are responsible for both teaching and research but there may also be research-only staff, usually on fixed-term externally-funded contracts, which may be classified on the sameside of the ‘trench’ as academics. The ‘umbrella carriers’ of ‘middle management’ and ‘dealing with difficult things’ provide matter for Chapter 7. In Chapter 8 and the conclusion there is encouragement to see the task in broader terms and to share ‘knowledge’ gained. Each chapter ends with suggestions for further reading under the heading ‘digging deeper’.

The scope of the needs to be met is now very wide. Government-defined ‘Levels’ of higher education include Levels 4 and 5, placing degrees at Level 6, with postgraduate Masters at 7 and doctorates at 8. The Higher Education and Research Act of 2017 therefore includes what is now a considerable range of ‘higher education providers’ in England, traditional Universities among them, but also hundreds of ‘alternative providers’. Some of these deliver higher education in partnership with other providers which have their own degree-awarding powers, relying on them to provide their students with degrees. These all need ‘professional services’ to support them in their primary tasks of teaching and, in many cases, also research.

Providers of higher education need two kinds of staff: to deliver education and research and others to provide support for them. That was noticed in the original drafting of the Further and Higher Education Act of 1992 s.65, 2 (b) which approved the use of (the then significant) ‘block grant’ public funding for:

the provision of any facilities, and the carrying on of any other activities, by higher education institutions in their area which the governing bodies of those institutions consider it necessary or desirable to provide or carry on for the purpose of or in connection with education or research.

In what sense do those offering such ‘services’ constitute a Profession? The Professional Qualifications Act of 2022, awaiting consideration of amendments and royal approval, is primarily concerned with licence to practise and the arrangements for the acceptance of international qualifications. It is designed to set out a framework ‘whereby professional statutory regulatory bodies (PSRBs) can determine the necessary knowledge and experience requirements to work in a regulated profession (for example nursing or architecture)’. It will permit ’different approaches to undertaking’ any ‘regulatory activity’ so as ‘to ensure professional standards’This is not stated to include any body recognising members of the Professional Services of higher education.  Nor does the Government’s own approved list of regulated professions.

The modern Professional Services came into existence in a recognisable form only in the last few decades.The need for support for the work of the ‘scholars’ got limited recognition in the early universities. When Oxford and Cambridge formed themselves as corporations at the beginning of the thirteenth century they provided themselves with Chancellors, who had a judicial function, and Proctors (Procuratores) to ensure that the corporation stayed on the right side of the law. The office of Registrar (Oxford) and Registrary (Cambridge) was added from the fifteenth sixteenth century to keep the records of the University such as its lists and accounts.

The needs to be met expanded towards the end of the nineteenth century. Oxford’s Registrar had a staff of five in 1914. The Oxford and Cambridge Universities Commission which framed the Act of 1923 recommended that the Registrar’s role be developed. The staff of Oxford’s Registrar numbered eight in 1930 and forty in 1958. By 2016 the Registrar was manager to half the University’s staff.

The multiplication of universities from the 1890s continued with a new cluster in the 1960s,  each with its own body of staff supporting the academics. A body of University Academic Administrative Staff created in 1961 became the Conference of University Administrators in 1993. The  resulting Association of University Administrators (AUA) became the  Association of Higher Education Professionals (AHEP) in 2023. CUA traced its history back to the Meeting of University Academic Administrative Staff, founded in 1961. Its golden jubilees was celebrated in 2011 in response to the changing UK higher education sector. It adopted the current name in 2023.

This reflects the development of categories of such support staff not all of whom are classified as ‘Professional’.  A distinction is now common between ‘assistant staff’ and the ‘professionals’, often described as ’academic-related’ and enjoying a comparable status with the ‘academic’.

The question of status was sharpened by the creation of a Leadership Foundation in Higher Education (LFHE) in 2004, merged with AdvanceHE in 2018.  This promises those in  Professional Services ‘a vital career trajectory equal to research, teaching and supporting learning’ and, notably, to ‘empower leaders at all levels: from early-career professionals to senior executives’ That implies that executive leadership in a provider will not necessarily lie with its academics. It may also be described as managerial.

Reading University identifies ‘role profiles’ of four kinds: ‘academic and research’; ‘professional and managerial’; support roles which are ‘clerical and technical; ‘ancillary and operational support’. The ‘professional and managerial’ roles are at Grades 6-8. It invites potential recruits into its ‘Professional Services’ as offering career progression at the University. The routes are listed under Leadership and Management Development; ‘coaching and mentoring’ and ‘apprenticeships’. This may open a ‘visible career pathway for professional services staff’ and ‘also form part of succession planning within a team, department or Directorate or School where team members showing potential can be nurtured and developed’.

Traditional universities tend to adopt the terminology of ‘Professional Services’. Durham University, one of the oldest, details its ‘Professional Services’ in information for its students, telling them that they will ‘have access to an extensive, helpful support network’. It lists eleven categories, with ‘health and safety’ specifically stated to provide ‘professional’ advice. York University, one of the group of universities founded during the 1960s, also lists Professional Services. These are ‘overseen by the Chief Financial and Operating Officer’ and variously serving Technology; Estates and Facilities; Human Resources; Research and Enterprise; Planning and Risk; External Relations; student needs etc. The post-1992 Oxford Brookes University also has its Professional Services divided into a number of sections of the University’s work such as ‘academic, research and estates’. Of the alternative providers which have gained ‘university title’ Edge Hill (2006) lists seven ‘administrative staff’, two ‘part-time’, one described as administration ‘co-ordinator’, one as a ‘manager’ and one as a ‘leader’.

Reeds’ study draws on the experience of those working in a wide range of providers, but it does not include an account of the provision developed by  Oxford or Cambridge. Yet the two ancient English Universities have their own centuries-long histories of creating and multiplying administrative roles. The Colleges of Oxford and Cambridge similarly distinguish their ‘academic’ from their other staff. For example St John’s College, Oxford and Sidney Sussex College, Cambridge list more than a dozen ‘departments’, each with its own  body of non-academic staff.

In Oxford the distinction between academics and ‘professional’ administrators is somewhat blurred by grading administrators alongside academics at the same levels. Oxford’s Registrar now acts ‘as principal adviser on strategic policy to the Vice-Chancellor and to Council’, and to ‘ensure effective co-ordination of advice from other officers to the Vice-Chancellor, Council, and other university bodies’ (Statute IX, 30-32). Cambridge’s Registrary is ‘to act as the principal administrative officer of the University, and as the head of the University’s administrative staff’ and ‘keep a record of the proceedings of the University, and to attend for that purpose’ all ‘public proceedings of the University’, acting ‘as Secretary to the Council.’

The record-keeping responsibility continues, including ‘maintaining a register of members of the University’, and ‘keeping records of matriculations and class-lists, and of degrees, diplomas, and other qualifications’. The Registrary must also edit the Statutes and Ordinances and the Cambridge University Reporter (Statute C, VI). The multiplication of the Registrary’s tasks now requires a body offering ‘professional’ services. There shall be under the direction of the Council administrative officers in categories determined by Special Ordinance’ (Statute c, VI).

Oxford and Cambridge each created a ‘UAS’ in the 1990s. Both are now engaged in ‘Reimagining Professional Services’. Oxford’s UAS (‘University Administration and Services’, also known as ‘Professional Services and University Administration’) is divided into sections, most of them headed by the Registrar. These are variously called ‘departments’, ‘directorates’, ‘divisions’, ‘services’ and ‘offices’ and may have sub-sections of their own. For example ‘People’  includes Childcare; Equality and Diversity; Occupational Health; Safety; ‘Organisational Development’; ‘Wellbeing’ and ‘international Development’, each with its own group of postholders. This means that between the academic and ‘the traditional student support-based professional services’ now fall a variety of other tasks some leading to other professional qualifications, for example from the Chartered Institute of Personnel and Development, the Chartered Management Institute or in librarianship and technology.

Cambridge’s UAS (Unified Administrative Service), headed by its Registrary and now similarly extensive and wide-ranging, had a controversial beginning. Its UAS was set up in 1996 bringing together the Financial Board, the General Board, and the Registry. Its intended status and that of its proposed members proved controversial. Although it was described as ‘professional’, the remarks made when it was proposed in a Report included the expression of concerns that this threatened the certainty that the University was ‘academic led’. This prompted a stock-taking Notice published on 20 June 2001 to provide assurance that ‘the management of the University’s activities, which is already largely in the hands of academic staff, must also continue to be academic-led’ and that the ‘role of the administration is to support, not to manage, the delivery of high-quality teaching and research’.  But it was urged that the UAS needed ‘further development both in terms of resourcing and of organization’. The opportunity was taken to emphasise the ‘professionalism’ of the service.

With the expansion of Professional Services has gone a shift from an assumption that this forms a ‘Civil Service’ role to its definition as ‘administrative’ or ‘managerial’. ‘Serving’ of the academic community may now allow a degree of control. Reeds suggests that ‘management’ is a ‘role’ while ‘leadership’ is a ‘concept’, leaving for further consideration whether those in Professional Services should exercise the institutional leadership which is now offered for approval.

In Cambridge the Council has been discussing ways in which, and with whom, this might be taken forward. On 3 June 2024 its Minutes show that it ‘discussed the idea of an academic leaders’ programme to help with succession planning by building a strong pool of candidates for leadership positions within the University’. It continued the discussion at its July meeting and agreed a plan which was published in a Notice in the Reporter on 31 July:

to create up to six new paid part-time fellowships each year for emerging academic leaders at the University, sponsored by the Vice-Chancellor. Each fellow would be supported by a PVC or Head of School (as appropriate) and would be responsible for delivering agreed objectives, which could be in the form of project(s).

‘In addition to financial remuneration’, the Fellows would each receive professional coaching, including attendance on the Senior Leadership Programme Level 3. Unresolved challenge has delayed the implementation of this plan so far.

The well-documented evolution and current review of Professional Services in Oxford and Cambridge is not included, but the story of Professional Services told in this well-written and useful book is illustrated with quotations from individuals working in professional services.

SRHE member GR Evans is Emeritus Professor of Medieval Theology and Intellectual History in the University of Cambridge.