27 July 2026 
Julia Ascott, Employment taxes specialist
USS has launched its formal consultation with UCEA on the funding assumptions for the 2026 valuation. The consultation is based on a significantly improved funding position and presents several strategic choices for the sector.
Headline funding position
Stability remains the key theme
USS says that feedback received from employers through UCEA, and direct engagement indicates a strong preference for:
Key strategic questions being explored
USS is asking UCEA and employers for views on:
What USS says about contributions
USS modelling suggests that reducing contributions to the Future Service Cost level would increase the likelihood of future deficits and contribution increases compared with maintaining contributions at current levels. As a result, USS is testing employer views on whether contribution stability should remain the priority.
Wider sector context
USS acknowledges ongoing financial pressures within parts of the higher education sector but continues to view the overall employer covenant as robust, supported by the sector's scale, diversity and covenant support measures introduced following the 2020 valuation.
Key dates and events
We’ve added Mercer’s Higher Education Group comments on the provisional results and consultation within the pensions discussion board post here.
BUFDG has been liaising with USS regarding the disclosure letter, which is typically published in August/September. We will update members as soon as we hear anything on the expected publication date. Just a reminder that no modeller is necessary as the scheme is in surplus (and therefore no provisions required).
One of the most widely discussed issues is the growing attention being paid to LGPS funding surpluses. Media reports suggest that policymakers are exploring whether strong funding positions across many LGPS funds could support wider economic investment objectives, particularly through increased local infrastructure investment and regional growth projects.
Alongside this, the LGPS policy agenda remains active. July's Current Issues in the LGPS briefing from Hymans Robertson highlights the publication of the government's ‘Fit for the Future’ guidance, referenced in the LGPS June Bulletin here, ongoing valuation activity across public service pension schemes, and the implications of recent changes to the SCAPE discount rate (covered in LGPS May Bulletin).
For employees, an important development is the introduction of the Low Earner's Pension Payment. From August 2026, HMRC will begin contacting individuals who may be eligible for a payment designed to address differences in pension tax relief for lower earners in net pay pension arrangements, including the LGPS. Eligible members do not need to take any action, as HMRC will identify and contact qualifying individuals directly.
There are also a number of wider consultations and sector developments underway, including the government's review of the Occupational and Personal Pension Schemes General Levy and ongoing discussions about the future structure, funding and governance of the LGPS. Resources published by the LGPS Scheme Advisory Board, Hymans Robertson and sector publications continue to highlight the evolving regulatory environment facing LGPS employers and funds.
On the LGPS site, there have been updated their retirement planning guide and promotional materials for all employers highlighting the value of the LGPS to share with their employees can be found in the following links: England and Wales toolkit, and Scottish toolkit.
Unsurprisingly, the headline news from the Teachers' Pension Scheme (TPS) 2024 valuation is the significant reduction in the employer contribution rate from 28.6% to 17.6% from April 2027, a fall of around 11 percentage points. The change follows the Government Actuary's Department valuation and is expected to provide substantial financial relief for post-92s, while leaving member benefits unchanged.
Times Higher Education suggests that plans to move staff into subsidiary companies, introduce alternative pension arrangements, or continue large-scale redundancy programmes may now be harder to justify, given the anticipated savings from lower TPS contributions.
While employers' representatives have welcomed the financial breathing space, UCU argues that the lower contribution rate removes a key justification for restricting access to the TPS. The union is calling on institutions to stop blocking entry to the scheme and to use the savings generated by the reduced employer rate to support staff, protect jobs and maintain pension provision.
Although the reduction is undoubtedly good news for employers currently participating in TPS, the debate around long-term pension strategy and affordability in higher education looks set to continue. Within the BUFDG Pensions discussion board, we have shared adviser concerns about the scheme's future volatility and the challenge of planning around contribution rates that can change significantly between valuations.
UCEA has advised that the Government Actuary has finalised the NHS Pension Scheme (England and Wales) valuation, resulting in a reduction in the employer contribution rate from 23.78% to 15.58% with effect from 1 April 2027. The primary factor behind this reduction is the Government's recent increase in the SCAPE discount rate, alongside favourable valuation assumptions and scheme experience.
For medical schools, it remains unclear whether the current employer contribution subsidy arrangements will continue beyond the 2026/27 financial year.
On 13 July 2026, the Department of Health and Social Care provided a further update on implementation of the McCloud remedy. Over 1.1 million NHS Pension Scheme members are affected by the remedy. The NHS Business Services Authority (NHSBSA) has already issued more than 122,000 Remedial Pension Savings Statements (RPSS) and continues work on outstanding cases.
At present, the McCloud remedy does not require significant payroll action by university employers. However, institutions employing clinical academics should be prepared for requests from NHS Pensions and increased staff enquiries regarding pension tax, retirement choices and remedial pension savings statements as the NHSBSA continues implementation of the remedy through 2027.
HMRC has published new guidance explaining how State Pension income is taxed where an individual also receives other taxable income, such as occupational pensions, employment income or investment income. This may be a useful resource for employees approaching retirement who have questions about how their pension income will be taxed and recommend a link to it is included on your intranet.
HMRC and HM Treasury have published a policy paper on Defined Benefit Pension Scheme Surplus Payments to Members. The paper explores proposals that would allow surplus funds in defined benefit pension schemes to be shared more easily with members, subject to appropriate safeguards.
Despite the recent Government reshuffle, Torsten Bell has retained responsibility for pensions policy, providing a degree of continuity as the Government progresses its programme of pension reforms, including pensions dashboards, value for money measures and the implementation of the Pension Schemes Act 2026.
Wonkhe has published an interesting article examining the patchwork of pension arrangements across the higher education sector. The piece highlights how universities operate within a complex landscape that includes USS, TPS, LGPS, NHS Pension Scheme participation for clinical academics, and a variety of legacy arrangements. It also considers the financial and strategic challenges institutions face when balancing pension costs, recruitment and workforce planning.
The Pensions Dashboards Programme has released a short video explaining what users will be able to see and do when pensions dashboards become available.
The Government has published an updated Workplace Pensions Roadmap, providing further detail on the implementation of pension reforms arising from the Pension Schemes Act 2026.
