The scale of the deficit at the Social Housing Pension Scheme means tough choices will have to be made
Who will pick up the bill?
Although it was expected, the news that the Social Housing Pension Scheme is now facing a deficit in excess of £1 billion presents some worrying questions for the 64,000 housing professionals who are members. The Pensions Trust, which manages the £2.2 billion SHPS, has already laid out a £413 million plan to tackle this, but its 22,678 active members who are still paying into the scheme will want to know how hard this will hit their pockets at a time when many are already facing pay freezes.
The answer lies with the finance directors of the 700 member organisations and here is what will influence their decision. First, what is the burden of additional contribution which the Pensions Trust will assign to individual member organisations? The Pensions Trust has already said an additional £30.6 million will be required annually from members over the next 13-and-a-half years, but will not decide until 31 July who will pay what.
Second, once finance directors know the size of the blow, they will have to decide how to distribute the pain. Traditionally housing associations have shared the burden of any increased pension contributions with their staff who are scheme members. This time landlords are likely to take into account whether or not staff have received recent pay increases. If yes, expect the pain to be shared or even passed on entirely. If no, then landlords may view this as a chance to reward their teams.
Third, should landlords continue to offer full access to SHPS or should they restrict it? Many are taking the view that they can no longer offer full access to the more lucrative elements of the scheme to new entrants. This is unfortunate, but a pragmatic step.
Some may not have a choice, however, as the Pensions Trust is assessing the ability of members to pay higher contributions. Those employers deemed a high risk as a result will be forced to close more generous aspects of the scheme to new members.
Finally, finance directors must scrutinise the performance of the Pensions Trust in managing the SHPS far more closely. It is in no one’s interests for the scheme to fail with an exodus of members, but those members need to be reassured that investment decisions are being taken to ensure further dramatic deficit growth is avoided.