27/03/2025
Background
The Social Housing Pension Scheme (SHPS) is a pension scheme available for employers in the social housing sector to join, to provide pensions benefits to employees. SHPS provides benefits on both a defined benefit and defined contribution basis. It has two defined benefit sections, one providing traditional final salary benefits, the other providing benefits on a Career Average Revalued Earnings (CARE) basis.
Both employer and employees pay contributions to SHPS. The contribution rates are variable (more on that below), but it is ultimately up to the employers to make up the cost of providing employees with the benefits.
Recent events in relation to SHPS will affect the costs to employers participating in SHPS, and may also have employee relations consequences – these are explained below.
Historic Amendments to SHPS
A review of the governing documents of the SHPS has indicated that there may be some historic issues with the way in which changes have been made to the SHPS. In particular, this creates a concern in relation to amendments which were made to the SHPS which affected members’ benefits. If the changes were not made correctly, scheme members could potentially be entitled to greater benefits than previously thought, and the liabilities of employer organisations would be higher than is currently estimated.
The Trustee of the scheme, TPT, has applied to court for guidance on whether those changes were made correctly, what the implications are if not, and what (if any) changes or corrections need to be made. The court is expected to rule on this case in the first half of 2025.
If you would like more details on the current issues facing the SHPS and the likely implications for you as an employer, please contact our Pensions team.
Outcome of 2023 Actuarial Valuation
Like all defined benefit pension schemes, SHPS is required to undertake a triennial actuarial valuation to establish its funding position. The most recent valuation of SHPS was completed in August 2024 and showed that the funding position of the scheme has improved slightly but, more significantly, the overall size of the scheme has reduced drastically. As a result of the changes reported in the most recent actuarial valuation, employers were tasked with making a number of decisions about contributions payable to SHPS and benefits provided to employees who are members of SHPS. There was a consultation on these decisions at the end of 2024 and employers had until 31 January 2025 to inform SHPS about their choices, which relate to the following:
- Employees will, for a temporary period, not be able to accrue benefits in one of the CARE sections of the Scheme as it will no longer meet certain minimum legal requirements. As a result, employer in that section had to decide what benefits members should be provided with;
- The cost of providing benefits for future service has reduced by more than half, and employers had to choose how these cost savings were shared between them and their employees
- The costs each employer pays for expenses will increase, so employers will need to take those increased administration costs into account.
Although employers have now made their decisions on these changes, they will not be implemented until 1 April 2025. Having made their decisions, employers will need to determine how their choices are communicated to their workforce and to prepare for implementation of the change in April – we would be happy to assist with that process.
