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Coronavirus to drive further exits from sector pension fund to less generous schemes
The financial impact of coronavirus is likely to see more housing associations exit the Social Housing Pension Scheme (SHPS) and move to less generous schemes, pensions figures have said.
Inside Housing has spoken to a number of pensions experts who predict that coronavirus will accelerate the trend of housing associations reducing numbers of employees on defined benefit (DB) schemes and may tempt others to quit the SHPS as they look to gain more control over their liabilities.
Martin Harlow, senior consultant at XPS Pensions Group, told Inside Housing: “I expect there will be further transition from defined benefit to [less generous] defined contribution schemes and coronavirus will only accelerate that.”
Mr Harlow also said the pandemic could mean more employers leave SHPS if the £1.5bn deficit increases, to avoid having to increase contributions.
“Those who were thinking about leaving will start thinking about it more as a proposition. I don’t see there being any slow-up in terms of employers deciding they need to look at this,” he said.
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A spate of exits occurred in November 2019 when Riverside, Sovereign and Orbit all quit the multi-employer scheme citing the desire for greater control over costs and risks.
Rebecca McKay, partner at Trowers & Hamlins, said that the law firm has heard from several clients that want to reduce liabilities and risks by moving from DB to defined contribution, and transfer out of SHPS. She said that the pandemic has provided a “new kick” for some employers.
She said the firm is in the process of facilitating two bulk transfers out of the SHPS this year.
Richard Soldan, partner at Lane Clark & Peacock, agreed: “The financial impact of coronavirus is the sort of thing that could increase the general desire to exit SHPS.”
He told Inside Housing that if the deficit rises again, “some associations will want more control, meaning it will become more common to exit”.
But Mike Richardson, another partner at Lane Clark & Peacock, also suggested that an exit may be too big a project to take on during the pandemic.
He said: “An exit out of SHPS is costly and time-consuming and is something that could always be deferred by a year. However, a lot of associations have put it to one side already, so some might think they need to get on and do it.”
