The Universities Superannuation Scheme's annual report shows that "incentive" payments to staff in the fund's London Investment Office rose from nearly £3.5 million in 2010-11 to £6.2 million in 2011-12.

Those bonuses were part of the scheme's overall £26.1 million in staff costs last year - up from £20.1 million in 2010-11 - as it took on people to run new projects.

The report shows that the highest-paid member of the USS' investment staff earned between £810,000 and £820,000 last year, while 17 employees earned more than £200,000.

According to the report, the London Investment Office increased its assets by 0.93 per cent in 2011. This compensated for an almost 8 per cent fall in the USS assets managed by an external company specialising in global equities.

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Meanwhile, USS chief executive Tom Merchant was paid £261,000, plus £29,000 in pension contributions - down from last year's overall package of £335,000.

Sir Martin Harris, the scheme's chairman and former head of the Office for Fair Access, picked up £67,000, while Glynis Breakwell, vice-chancellor of the University of Bath, was awarded £29,000 for her work as a director of the scheme.

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The payments coincided with the closure in October 2011 of the final salary scheme to new members, who will now receive a career-average pension on retirement.

Overall, the size of the USS' assets increased last year by 4.4 per cent to £34.2 billion, which makes it the country's second-largest private pension fund.

However, the fund's deficit rocketed from £2.9 billion in 2011 to £9.8 billion in 2012 as liabilities rose by 24 per cent, mainly because of falls in gilt yields caused by quantitative easing, which has led to a recalculation of required future payments.

The report notes that the scheme's funding level of 77 per cent was "an ongoing concern for the board, mainly due to the economic climate and unpredictable investment returns".

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jack.grove@tsleducation.com.