Pension Cash Supplement

The University provides a pension cash supplement (PCS) for those who are adversely affected by pension tax allowances, subject to certain eligibility criteria

To apply for the option you must complete the Pension Cash Supplement opt out form.  Answers to some FAQs are available here.

PCS Policy: Summary

A group established by Council for the purpose of considering the University’s response to pension taxation changes has approved the alternative of a 12% cash supplement to salary in place of pension provision for those who are adversely affected by pensions tax allowances, subject to certain eligibility criteria.

Background

Employees of the University of Oxford are provided with membership of one of the University’s pension arrangements. Academic and academic-related staff are entitled to join the Universities Superannuation Scheme (USS). USS is a hybrid scheme based on Career Revalued Benefits up to a salary threshold and defined contribution benefits above the salary threshold.  Additional death in service and ill health benefits are also provided for active members of USS. 

From January 2024 active members of USS pay contributions at a rate of 6.1% of pensionable salary and the employer pays the balance of the cost (14.5%). The employer carries the risk in the Career Revalued Benefits section for investment, longevity and future deficits emerging. 

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As a result of recent Government interventions, particularly with changes to pension taxation, it may be more beneficial for some employees to receive a cash supplement in place of additional pension contributions. The University’s objectives in providing for an alternative to pensions contributions are to remain competitive within the external market, and to attract and retain high-calibre individuals.

The University is committed to investing significant resources in pension provision for employees so that at retirement they are more financially secure.  The University does not want to provide any encouragement to any employee who may not be financially secure to opt out of pension scheme membership.   In the case of, typically high earning, employees who are affected by the pension tax limits (the Lifetime Allowance (LTA) or the Annual Allowance (AA)) the University is confident that they have a high degree of financial security for retirement as a result of previous pension scheme membership. 

Those who fulfil the eligibility criteria below may, if they wish, opt out of active membership of USS, in return for a taxable cash supplement of 12% of salary.

The level of the cash supplement has been calculated to ensure that this facility is provided at no extra cost to the University and is broadly in line with the typical level of benefit foregone. It is non-negotiable.

To be eligible for a pension cash supplement, an individual must:

  •  be an employee of the University;
  •  be able and willing to demonstrate that they will be subject to tax charges relating to the Annual Allowance (AA) i.e. they have exceeded the AA and have benefit statements from their pension providers (including USS) and/or a protection application certificate or acknowledgement from HMRC;
  • confirm that they understand that opting out of active membership of USS will mean that they will no longer automatically benefit from death in service and active member ill health provisions (unless Enhanced Opt Out is selected – see section below);
  • confirm that they have considered taking independent financial advice in relation to this matter; and
  • consent to a variation to their contract.

An individual who fulfils these criteria may apply in writing to receive the cash supplement in place of further pensions benefits, using form Application for Pension Cash Supplement. The completed form, together with the specified enclosures, should be signed and sent to the Head of Pensions. The Head of Pensions will confirm that each applicant meets the criteria listed above, process the application to terminate their active membership of USS, and arrange for the cash supplement to be paid, with effect from the date specified on the form (or the earliest possible date if insufficient notice is given).

Those who choose to leave active membership of USS will no longer automatically be covered by death in service or ill health provisions. USS has introduced an arrangement called Enhanced Opt Out (EOO).  Should an individual elect for this option and then die in service or retire due to incapacity, EOO will provide benefits as if the individual had remained in USS active membership. This cover costs employees 2.5% of pensionable salary. The University also contributes 6.3% of pensionable salary for individuals who choose to take advantage of EOO. Further details of EOO are available on the USS webpage on Pension Tax.  

The level of the cash supplement has been set in the expectation that most individuals who opt out of active membership of USS will take advantage of the cover provided by EOO.  There is no adjustment to the pension cash supplement for those who do not opt for EOO. 

Those who choose to opt out of active membership of USS should state in the appropriate section of the Application for Pension Cash Supplement form whether they wish to choose EOO. If they do, they should also complete the “USS Election for enhanced opt out with continued death and incapacity benefits” form and enclose it with the completed Application for Pension Cash Supplement form.

From 1 October 2016 the option of a Voluntary Salary Cap (VSC) is available.  Individuals may cap the value of their pensionable salary in USS to help manage their future benefit accrual within the Annual Allowance threshold.  The VSC can be no lower than the defined benefit salary threshold.  Should an individual choose the VSC, the cash supplement will be available on pensionable salary above the VSC.  Further details of VSC are available on the USS webpage on Pensions Tax.  Individuals will be able to maintain full death in service and incapacity benefits in return for contributions of 2.5% (or other amount as set by USS) of salary above the VSC.

Those who choose the VSC (and are subject to AA or LTA tax charges) and wish to take the cash supplement above the VSC should state on the Application for Pension Cash Supplement form whether they wish to maintain death in service and incapacity cover above the VSC and complete the relevant USS VSC election. 

It is matter for the individual to take advice as to whether the additional cash allowance, subject to tax and National Insurance, outweighs the benefits of membership of USS, albeit subject to tax charges in respect of benefits above the LTA and AA permitted maxima.  This is not a straightforward decision and individuals are strongly encouraged to seek independent financial advice when considering this course of action.  In some instances, further accrual of pension benefits, albeit above the LTA and AA limits, could provide better value than the cash alternative. 

Those who do decide to opt out of active membership of USS should also seek independent advice as to whether to choose EOO.

Those who cease active membership of USS and can demonstrate that they meet the eligibility criteria above will be entitled to gross monthly payments equating to 12% of their pensionable salary, as defined under the rules of the relevant pension arrangement, in accordance with the University’s Pension Policy.  These payments will replace the employer contributions relating to active membership of the pension arrangement.  

If an individual re-joins the pension arrangement, payment of the cash supplement will cease. 

Should an individual elect for EOO, the required employer contributions of 6.3% (currently) will be paid to USS, in addition to the 12% paid to the employee.  The individual will be responsible for any member contributions required under EOO (currently 2.5%).

Those who have opted out of active membership of USS, but who wish to re-join the scheme can, subject to USS eligibility, do so by contacting the Pensions Office. Individuals should take independent financial advice in relation to their own tax and retirement saving arrangements.

Both the option of the cash supplement and the option of EOO are subject to University consent.  The University may at any time withdraw or amend this arrangement.  The arrangement will be reviewed periodically and when there is a change in the taxation of pensions or the pension arrangements. 

Members of the NHSPS with pension saving above the LTA or AA maxima may elect for the pension cash supplement, if they meet the eligibility criteria above.  It should be noted that:

  • NHSPS does not have an alternative for death in service or ill health cover equivalent to EOO in USS; and
  • if, whilst employed by the University, an individual changes their mind, or their situation changes, they may not be able, under current rules, to re-join the NHSPS.  In such circumstances it may be possible to join USS. 

An equality analysis of this policy has been undertaken. The report of this analysis can be viewed by application to the Head of Pensions.

Further information

For further information about this policy, please contact the Head of Pensions. You will also find further information on the links to the right, including the answers to some frequently asked questions.

Contact Us

 : Pensions Office
       University of Oxford

       c/o Oxford University Press
       Great Clarendon Street
       Oxford OX2 6DP

 : OSPS - osps@admin.ox.ac.uk
       USS - uss@admin.ox.ac.uk
       NHSPS - oxnhsps@admin.ox.ac.uk
       NEST - nest@admin.ox.ac.uk
       Auto-enrolment - 
       ox.autoenrolment@admin.ox.ac.uk
 : General - (01865) 616133
       USS - (01865) 616067
       OSPS - (01865) 616020

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