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Best Social Housing Pension Scheme funding news for many years, say LCP

Pensions & benefits Housing Association

Figures shared with housing associations who participate in the Social Housing Pension Scheme (SHPS) showed that SHPS estimated its deficit had fallen from £1.6bn in September 2020 to £930m at 30 September 2021.

This is positive for housing associations, and pensions specialists LCP estimate the position has continued to improve, given changes in financial markets. LCP’s analysis shows the deficit has fallen perhaps as low as £800m recently, nearly halving the deficit from September 2020 in less than 18 months.

Richard Soldan, head of LCP’s social housing pensions practice said: “This is the best news about the funding in SHPS for many years, with our estimates showing the position being better than any reported deficit since before the 2011 valuation – and with a deficit that is more than £500m lower than SHPS’s projections at this stage. Coincidentally, it comes just before housing associations’ contributions to SHPS are to increase following the 2020 actuarial valuation.”

Andy Thompson, LCP partner and part of LCP’s social housing pensions practice added: “In the normal course of events any improvement in position would only feed through following the next triennial valuation in 2023, and if SHPS is still ahead of its funding plan it will be really interesting to see whether the SHPS trustees look to reduce contributions or bank positive performance to reduce risk at that point – or indeed use some combination of the two. Another question is perhaps around how SHPS will react if this improvement persists over the next 6 months – would SHPS consider the option of bringing forward the valuation from 2023 to 2022 as a possible route to reduce contributions and offer some welcome respite for SHPS employers?”

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