Improvement in SHPS financial position offers landlords ‘more opportunities’, say experts

“As it stands, the deficit reduction contributions that employers are making under the recovery plan agreed at the last actuarial valuation are on track to clear the deficit by the agreed end date of 31 March 2028.”

Mr O’Regan explained that the actual valuation position will depend on market conditions on 30 September 2023 and the outcome of discussions between the SHPS employer committee and the provider’s trustee body.

Mike Richardson, a partner and head of social housing at LCP, said: “For many housing associations, their SHPS defined benefit deficit has long been a significant drag on resources and management time. 

“It would be tempting to see the potential good news of the current valuation as a welcome reprieve and take some time off from having to consider pensions issues. However, the improvement in SHPS finances means housing associations have more opportunities than ever to transform their pensions cost and risk exposures.

“An exit or transfer from SHPS, which may have seemed out of reach previously, may now be a realistic prospect – and could bring associations some real benefit.”

Mr Richardson’s view on the potential for a transfer out of SHPS comes as Inside Housing reported last week that Notting Hill Genesis (NHG) became the latest G15 landlord to leave the scheme, following a similar exit by One Housing last year.

According to an update on the website of TPT, NHG has set up its own scheme, following a bulk transfer out of the pension in December.

Martin Robinson, senior consultant at LCP, said: “Housing associations that have current employees earning further benefits in the SHPS defined benefit section will very likely have to consider how to address a large reduction in contributions for future service.

“And those who have closed defined benefit accrual off in the recent past will need to think how to respond to employees who ask them to reverse that decision.”

TPT pointed out that it has recently held roundtable discussions with interested businesses on launching multi-employer collective defined contribution (CDC) schemes.

Mr O’Regan: “SHPS remains the scheme of choice for the social housing sector with over 45,000 DB [defined benefit] members and over 300 DB sponsoring employers. The covenant support to the scheme remains very strong with more than 40 of the employers having more than 10,000 units in their housing portfolio.

“TPT is delivering a series of SHPS webinars to employers. We have presented sessions on the valuation process and the profile and ongoing strength of the scheme. In the diary for the coming months are sessions on the valuation outcome, the long-term strategy of the scheme, and also CDC as a potential option available to employers for future pension benefit provision.”

Tim Gilbert, partner at LCP, said: “We strongly encourage boards to be thinking about their pensions strategy now, both in relation to SHPS and more widely, so that they are ready to respond in a timely manner. Otherwise there is a risk that hurried decisions are made under time pressure, and potential opportunities are missed.”