Guidance issued on how to account for Social Housing Pension Scheme

The National Housing Federation (NHF) has issued guidance to housing associations on how to account for the Social Housing Pension Scheme (SHPS) and the Scottish Housing Association Pension Scheme (SHAPS) as defined benefit schemes for the first time.

It follows proposed changes by the Financial Reporting Council (FRC) to FRS 102 to enable multi-employment pension schemes to move from defined contribution to defined benefit accounting. Therefore, the NHF, in partnership with other sector leaders, has decided to issue the guidance.

The SORP Working Party (SWP) considered this guidance and how it should be applied to SHPS and the SHAPS. As a result, the four Federations (National Housing Federation, the Scottish Federation of Housing Associations, Community Housing Cymru and the Northern Irish Federation of Housing Associations have issued a guidance document for housing associations.

The FRC guidance proposes to add text to section 28 of FRS 102 with reference to multi-employer defined benefit pension schemes.

It stated: “When an entity participates in a defined benefit plan, which is a multi-employer plan that in accordance with paragraph 28.11 is accounted for as if the plan were a defined contribution plan, and sufficient information to use defined benefit accounting becomes available, the entity shall: (a) apply defined benefit accounting in accordance with paragraphs 28.14 to 28.28 from the relevant date as defined in paragraph 28.11C; and (b) recognise the difference between: (i) its net defined benefit liability (after taking into account the effect of paragraph 28.22, if any) at the relevant date as defined in paragraph 28.11C; and (ii) the carrying value at the relevant date of its liability for the contributions payable arising from an agreement to fund a deficit, if any, plus any liability recognised in accordance with paragraph 28.13(a); as a separate item in other comprehensive income.”

For the purposes of applying paragraph 28.11B, the relevant date is the first day for which sufficient information to use defined benefit accounting becomes available, unless this would require a restatement of comparative information when the relevant date is the first day of the current reporting period.

However, the NHF said The Pensions Trust has said that it will not be able to provide sufficient information prior to 31 March 2018 to enable social landlords to apply defined benefit accounting before that date.

"On the assumption that sufficient information will be available for 31 March 2019 year-ends, with defined benefit accounting numbers as at 31 March 2018, considering the guidance in FRED 71, the SWP’s view is that: the difference between the deficit funding agreement social landlords currently recognise for SHPS/SHAPS, and the net defined benefit deficit, should be recognised in other comprehensive income, and the relevant date to apply the adjustment is 1 April 2018," the NHF stated.

The guidance document can be viewed here.

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