The 2020 triennial valuation of the Social Housing Pension Scheme (SHPS) has been released. SHPS is the main pension scheme for the social housing sector, with approximately 65,000 employees from over 400 employers being enrolled in the scheme.
The valuation at 30 September 2020 shows that the SHPS funding level has increased from 75% in 2017 to 77% in 2020, but the shortfall on the scheme has increased from £1.5 billion to £1.6 billion. Investment returns were higher than expected over the three year period since the previous valuation at 9%, due to changes in government bond yields and inflation levels, but at the same time the scheme’s liabilities have risen.
A recovery plan has been agreed which it is intended will maintain a prudent funding approach, and protect both member benefits and the long-term funding of the scheme. Under the plan, aggregate deficit contributions of £175m per annum will be payable from April 2022 to March 2028 and deficit contributions will increase at 5.5% per year from April 2023.
To help manage the scheme shortfall, employees who are enrolled in SHPS may be asked to pay bigger contributions for the same benefits or take a cut to the benefits they are earning. A number of social housing providers have closed their SHPS defined benefit scheme to new employees to manage pension risk.