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Bromford follows Clarion out of SHPS
Bromford will follow Clarion in leaving the multi-employer Social Housing Pension Scheme (SHPS), Inside Housing can exclusively reveal.
The group will become the fifth association to leave the scheme, which has seen its deficit increase repeatedly. Clarion, Radian, Genesis and Sanctuary have all already left.
Lee Gibson, executive director of finance at Bromford, told Inside Housing: “Bromford is departing the SHPS scheme to set up its own fund under The Pensions Trust’s umbrella.
“This standalone fund will allow Bromford to manage its pensions contributions going forward and set a defined timetable for the repayment of the legacy deficit.”
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Bromford, like Clarion, will take its assets out of the scheme and put them in a stand-alone fund, which, like SHPS, will be managed by The Pensions Trust (TPT).
The move will allow Bromford to pay down its own deficit on SHPS – which Inside Housing understands is around £20m – at a rate of its own choosing.
Sam Mullock, an actuary in the housing team at First Actuarial, which assisted Bromford on the new scheme, said he knew of two further associations planning to leave in 2018.
The deficit on SHPS is predicted to increase by 50% to £1.5bn, which could force housing associations to pay more in contributions.
The deficit has increased at each of the previous three valuations, making it unusual even in a context of struggling defined benefit pension schemes.
The Pensions Regulator (TPR) has said in recent funding statements that it is keeping schemes whose deficits repeatedly increase on its radar.
Mr Mullock told Inside Housing that TPR had been sitting in on the SHPS valuation process. TPR and TPT have been contacted for comment.
TPT was supposed to publish the initial results of its valuation in December, but that has been pushed back, with publication now expected in February or March.
Increasingly, housing associations have shifted towards defined contribution pension schemes, meaning pensions are based on the amount employees put in. These transfer the risk of the pension fund being insufficient to provide the pension from the employer to the employee.
Bromford’s pensions will remain a defined benefit scheme but with a lower accrual rate, meaning employees will still receive a pension based on the number of years at the organisation, but will build up pension benefits more slowly.
