Calculating the pensions pay-off

May 12, 2000

I am surprised that there appears to be so much misunderstanding as to USS pension benefits. I would indeed have been delighted on retirement 18 months ago to have received a tax-free, six-figure lump sum based on "three times salary" (Letters, THES, April 28).

Even the chief executive of the USS is not accurate when he refers to a tax-free lump sum of 1.5 times final salary (Soapbox, THES, April 28). This is true only of a member who retires after 40 years' service. The lump sum is calculated on the basis of 3/80ths of pensionable salary, which is determined by the length of pensionable service. This is not the same as final salary. The difference can be significant.

I suspect that most USS members will not be entirely convinced by his argument in support of the 80ths accrual rate. While the lump sum is tax-free, it is unlikely, even when well invested, to produce sufficient annual income to make up the difference between a pension based on a 60ths accrual rate and one based on the lower 80ths rates.

D. G. Barnsley. Emeritus professor, faculty of law University of Leicester.

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