Pensions - Articles - Housing associations hit by pension contribution increases


The Social Housing Pension Scheme (SHPS), used by many housing associations as their main pensions arrangement, has just published the results of its three-yearly valuation as at September 2020.

 The valuation results mean:

 • housing associations will need to pay significantly increased contributions towards the Scheme’s deficit – an average 17% increase – and those contributions will then increase faster and go on for longer.
 • Whilst the initial increase may be lower than feared, overall the amount associations will be paying towards the deficit in future will be around 50% higher than expected under the current deficit repayment plan.
 • The deficit has remained broadly the same as in 2017, but the expectation was that it should have reduced significantly by 2020. The fact it is still a similar figure means more contributions will be needed than previously expected.
 • The deficit is now shared across fewer associations, following the exit from SHPS of a number of the larger associations over the last few years, which increases the share each association that remains in SHPS will need to pay.
 • Associations that continue to provide current employees with defined benefit pensions through SHPS will also see a 50% increase in the contributions for those benefits – a huge impact that will need to met by employers, by staff, or a combination of the two.
 
 Mike Richardson, Partner in LCP’s Social Housing practice, said “The increase in pension contributions will hit housing associations hard. We expected higher contributions, and the reality of the increases is now clear. All associations will need to find more cash to pay to SHPS, with the increase in costs of future defined benefits being particularly stark for those remaining associations that continue to offer such a benefit.”
 
 Richard Soldan, Partner and Head of LCP’s Social Housing practice, added “The increase in contributions will prompt many associations to consider how to react. Those that provide defined benefits at present will surely have to review the benefits they are offering to their staff. We have heard plenty of suggestions that we have reached the “final nail in the coffin” for defined benefits – well, this really does feel like the final nail as far as SHPS is concerned. And all associations, particularly the larger ones that remain in SHPS, may well question whether they should consider the option that a number of the biggest associations have taken in recent years and transfer their pension liabilities to a separate scheme, where they have greater input and influence on the way in which those pension liabilities are managed and funded.”
 
   

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