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Contributions into Scottish sector’s pension scheme to restart after deficit nearly triples
The Scottish Housing Associations’ Pension Scheme (SHAPS) deficit has nearly tripled in three years, with market conditions blamed for the rise that means contributions will have to restart.
Contributions into Scottish sector’s pension scheme to restart after deficit nearly triples #UKhousingThe Scottish Housing Associations’ Pension Scheme deficit has nearly tripled in three years, with market conditions blamed for the rise that means contributions will have to restart #UKhousingEmployer contributions will restart in April 2026, but these will be set at roughly half the previous amount following talks between pension committees.
More than 10,000 workers across 150 organisations in the Scottish housing sector are enrolled in the programme, which is managed by TPT Retirement Solutions.
The scheme’s deficit increased from £27m in 2021 to £79m as of its valuation on 30 September 2024. This was despite contributions of £33m from employers during that time.
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A briefing on the scheme’s results by pensions advisor First Actuarial stated: “For a well-funded and highly ‘hedged’ scheme, we’d expect the impact of changes in interest rates and inflation expectations to be broadly neutral.
“However, the above summary indicates that the overall impact of changing market conditions has been to worsen the funding position.”
Employers last made deficit contributions to the scheme in September 2022. From next spring, these payments will restart for at least four years with a 3% increase each April.
These contributions could last for another two years depending on the outcome of a scheme benefit review.
The September valuation also found that the SHAPS is around a third smaller than it was in 2021. Its assets are £690m and liabilities £769m, down from £1.1bn and £1.2bn respectively.
“The main reason for this is that long-term interest rates have increased significantly since the 2021 valuation – reducing both the assets and liabilities,” First Actuarial’s briefing added.
A spokesperson for TPT said: “The increase in deficit is in line with many other pension schemes, which are still recovering from market volatility arising from the 2022 Mini Budget.
“The valuation applies a prudent funding approach to protect member benefits, with a view to reducing the reliance on employer contributions, while also maintaining expected investment returns in future.
“Following discussions between the employer committee and the scheme committee – which represents the trustee – it was agreed that overall contributions from employers would be more than 50% lower than those last paid in 2022.”
Dale Walmsley, a partner at First Actuarial, said: “The latest SHAPS valuation highlights how pension schemes remain highly sensitive to changes in long-term interest rates.
“The standout message? Deficit contributions will resume from April 2026, but at around half the level last seen in September 2022.
“For employers still offering defined benefit pensions, there’s a silver lining: the cost of new benefits has dropped significantly.
“Now’s the time for housing associations to take stock, revisit budgets and consider how best to respond to these changes.”
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