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New Unite briefing on Social Housing Pension Scheme

Housing associations attack pension benefits

 

Unite's pension advisor, John Neal has prepared a new briefing on the biggest pension scheme in the housing sector - see below.

 

We recently reported news that the UK's largest houisng association, Clarion, is increasing employee pension contributions by 22.9% with the likely effect of pushing people in to poverty when they retire.

 

There is no good reason for attacks on pensions in the sector which is one of the most profitable in the UK economy. In 2018 Unite National Officer Siobhan Endean set out Unite's position in Inside Housing magazine,

 

“Unite will resist any changes that individual social housing organisations attempt to make to their pension schemes if it will result in a detriment to our members.

 

“Pensions are deferred pay and members will not stand idly by if their employer is intent on cutting their retirement income.”

 

Unite SHPS breifing

 

 

Background

 

The Social Housing Pension Scheme (SHPS) is the scheme of choice for the social housing sector with more than 500 housing organisations in it, providing pensions for more than 65,000 employees.

 

Why are Participating Employers leaving the SHPS?

 

Participating Employers are not generally leaving because of a concern over the long term viability of the scheme, but rather as a means of giving them greater control over being able to tailor their investment risk and pace of funding to suit their own preferences.

 

When Participating Employers leave does it have a negative effect on the SHPS?

 

In recent years there has been a number of bulk transfers and no doubt we will see more to come in the future. However the SHPS has over 350 participating employers. The majority of these are Registered Providers with significant assets behind them. Each valuation an independent covenant assessment is undertaken and as part of this the covenant specialist measures flight risk. From this work, even if the strongest employers were to leave the covenant strength would still be assessed as low risk.

 

There are a great deal of small to medium sized Registered Providers in the Scheme where it just wouldn’t be cost effective for them to run their own stand-alone schemes, even if they had the wish to do so. Ultimately SHPS would just end up as a smaller Scheme but will still enjoy a low risk covenant. The amount of liability applicable to the higher risk employers in the Scheme is not material and in the unlikely event all the high risk employers were to become insolvent, although the remaining employers would pick up this liability it would not significantly weaken the covenant strength.

 

How is the status quo monitored and checked?

 

TPT (TPT) Retirement Solutions who help run the SHPS carries out an annual Financial Assessment exercise on all employers with a liability in the Scheme to constantly monitor the scheme strength and this will feed into the external covenant assessment for each valuation. TPT also meets regularly with the Regulator of Social Housing to discuss how they monitor and report on employers. This gives comfort that it is a heavily regulated sector and any issues are highlighted and dealt with.

 

What is Unites view?

 

Obviously Unite would prefer for employers to remain in the SHPS.

 

However despite the recently announced bulk transfers (and the potential for a few more to come over the next 2 to 3 years), we still believe that SHPS will remain a very large scheme for the foreseeable future (with the economies of scale that brings) and will continue to enjoy a strong covenant.

 

The bulk transfers result in a minor loss to the economies of scale of SHPS. However, SHPS remains a very large and secure scheme. Even though the current SHPS funding deficit is significant, all employers are required to make good that deficit whether they ‘Leave’ or ‘Stay’.

 

Leavers will not affect the overall covenant and future viability of the scheme. So Unite has no concerns over the long term viability of the Scheme

 

March 3rd 2020

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