More than half of all housing associations are thought to not have policies in place for dealing with an expected large cost increase arising from the 2017 valuation of Social Housing Pension Scheme (SHPS) scheme.

Prior to 2005, the SHPS DB pension scheme was in surplus but every valuation since has shown an increased deficit, and at the last triennial valuation in 2014, the SHPS deficit had increased to £1,323 million. XPS Pensions Group believes that the deficit has grown further, and the SHPS has warned that increases to future service costs may be in the range of 30-50 per cent once the 2017 valuation is complete.

A survey conducted by XPS Pensions Group has found that more than half of housing associations are considering whether to close some or all of their DB sections to future accrual, but the majority do not have any firm plans in place at present. In the past, housing associations have differed in practice on who should meet the cost of the increased future service contributions, with almost equal numbers passing the full cost to members; adding the full increase to the employer; or equally sharing the cost rise.

Despite the ever increasing costs, the survey has found that many housing associations remain paternalistic and want to provide members with as much choice as possible, including a choice between DB and DC, if possible.

XPS Pensions Group pension actuary and head of social housing Chris Mapp, said that the introduction of auto-enrolment, in addition to successive SHPS valuations, had added significantly to the pension costs incurred by housing associations.

“Despite a desire to maintain the status quo, we are seeing many associations close some or all DB sections offered to future accrual. Many are ever more concerned they will not be able to meet further increases in future service costs.

“At the same time, we see housing associations keen to ensure that their DC pension offerings deliver a meaningful outcome for their staff. This often means contributing more than the statutory minimum under auto-enrolment, and we increasingly see a desire to harmonise provision for all staff and to stop the two-tier practices that have emerged over time.”

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