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Sector pension scheme deficit rises to £1.5bn

Contributions to the social housing sector’s pension scheme are set to rise by 50% following an increase in the scheme’s deficit.

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Contributions to the social housing sector’s pension scheme are set to rise by 50% following an increase in the scheme’s deficit #ukhousing

Housing associations were informed last night that the Social Housing Pension Scheme’s (SHPS) deficit has risen to £1.5bn, according to consultancy Lane Clark & Peacock (LCP), which has been sent the new plan.

LCP said this would mean that contributions from employers that are part of the scheme will have to increase by 50% to cover the increased costs.

At the last revaluation, the deficit increased to £1.3bn and associations were asked to pay more to reduce it to £1bn by 2018.


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Despite these increased contributions, however, a fall in the ‘discount rate’ used by actuaries to calculate the values of pension schemes has led to the increased deficit at this latest valuation by TPT Retirement Solutions.

Initially, from 1 July 2019, overall contributions across the scheme will rise by £14m a year to £161m, an increase of 10%, Richard Soldan, partner at LCP, told Inside Housing.

Previous valuations had predicted that contributions would fall in 2020 and again in 2023. The new plan has removed these drops, Mr Soldan said, and scheduled a £100m increase by 2023, more than double the original plan.

LCP said that as a result of the valuation, there will be steeper rises in contributions for employers with employees earning further benefits in the defined benefits sections of SHPS, such as final salary pensions.

According to consultancy First Actuarial, these new payments – which will also take effect from 1 July – will increase initially by 30%.

The valuation has been significantly delayed, partly due to more complicated governance arrangements on the scheme, recently introduced at The Pensions Regulator’s request. SHPS is now governed by an employers’ committee and a scheme committee, which must both agree on changes.

Colin Freeman, partner at First Actuarial, said the delays have resulted in “a relatively short period of time for employers to consider their strategy and consult with employees”.

Mr Soldan told Inside Housing that SHPS has asked associations to inform it of any changes it intends to make to pension plans to deal with the increased contributions by 30 April.

He added: “That’s six months away, but if an association is going to make those changes, it will almost certainly have to go through a 60-day consultation period with its employees.”

Update: at 11.23 on 17.10.18 This story was updated to include further detail about the SHPS valuation.

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