Assisted by A2Risk, USS has published the results of the largest ever survey of pension scheme members’ attitude to risk, and has revealed how its research has helped to develop the new USS Investment Builder due to launch this autumn.
The USS Investment Builder will be available to all 150, 000 active members of the scheme, and any one joining the scheme in future; membership of this new section will be automatic in respect of salary above £55,000 but will be available to all members if they wish to make additional contributions. Each of the scheme’s 370 participating employers has pledged to match the first 1% of any additional contributions made.
To support the design and development of this new section of the scheme the trustee has carried out a comprehensive programme of research, which included a survey of scheme members’ attitudes to risk. The research revealed that members broadly identified themselves as belonging to one of three groups when it came to their retirement savings, do it for me and help me do it, and I want to do it myself.
Members in the do it for me category wanted tailored products suited to their retirement needs whereas members in the help me do it category wanted clearly labelled options and information to help them choose between specific alternatives, finally members identifying with the I want to do it myself category wanted to be able to construct their own investment portfolio with a risk and return profile suitable to them and needed the tools and flexibility to be able to make those decisions.
Bill Galvin, Group Chief Executive Officer, said: “USS is completely focussed on providing the best possible outcomes to employees of the higher education sector, and our product development has been informed by very comprehensive research and engagement with our members.
“The default strategy for members responds to what we were told about how members see their defined contribution (DC) saving in the context of their overall retirement provision, so it will focus on growth for the majority of our members’ working lives. Approaching retirement volatility is reduced, but some growth elements are retained right through to members’ targeted retirement date. Members can of course change their contribution levels, risk profile and investment horizon by making simple choices, or engage more deeply in bespoke asset allocation decisions if they wish to do so.
“We are grateful to all the members, our research partners and others, who contributed to this research, the feedback has helped us to build an offer tailored to members’ needs, at better value than the wider market.”
Within the help me do it and I want to do it myself groups members’ needs varied between those who wanted higher/lower risk options and those who wished to make investment decisions based on ethical or religious beliefs.
Around half of the USS membership indicated they were interested in ethical investment, an ethical lifestyle fund will therefore also be provided alongside self-select options.
Ten self-select funds will be made available providing members with a range of options for constructing their own investment portfolios, using the major building blocks in different asset classes but without undue cost or complexity.
Professor David Blake, Director of A2Risk and Pension Institute at Cass Business School, said: “The USS survey of members is the largest ever conducted in the UK for exploring pension scheme members’ attitudes to investment risk. The findings support our previous research which suggests that members’ decisions about their retirement savings are often based more on perception of the investment world and themselves rather than on reality. The survey data have provided USS with a rich source of information from which they can draw upon to understand their members’ attitudes to investment risk and develop their USS Investment Builder proposition specifically for the benefit of the academic sector as part of the new hybrid scheme.”