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Employers in the roughly £690m Scottish Housing Associations’ Pension Scheme will restart deficit contributions to the scheme, after the 2024 valuation suggested the scheme deficit had more than doubled.
The latest triennial valuation found a deficit of £79m in the scheme – up from £27m in 2021 – resulting in a funding level of 90%, according to First Actuarial. The reduction from a ratio of 98% three years earlier has prompted a decision to restart deficit contribution.
Verity Trustees, which looks after the scheme, stressed that the SHAPS deficit had already come down by £18m in September last year, and that the deficit contributions agreed on are lower than those last paid in 2022.
“The increase in deficit is in line with many other pension schemes, which are still recovering from market volatility arising from the 2022 mini-Budget,” a spokesperson from Verity Trustees said.
The spokesperson added that “following discussions between the employer committee and the scheme committee – which represents the trustee – it was agreed that overall contributions from employers would be over 50% lower than those last paid in 2022”.
First Actuarial said market conditions appear to be behind the worsened funding position, noting that “for a well-funded and highly ‘hedged’ scheme, we’d expect the impact of changes in interest rates and inflation expectations to be broadly neutral”.
According to the consultancy, deficit contributions will restart in April and are scheduled to be paid until after the next valuation – at least until March 2030, increasing at 3% a year, with an option to extend the timeline until 2032 depending on the outcome of the TPT scheme benefit review.
While deficit contributions need to restart, the advisory said the cost of building up new final salary and career average pensions in the scheme is falling by over a third from April. However, expenses will increase, with a further review due to take place on how these are allocated between employers.
Employers still in limbo about validity of TPT amendments
Defined benefit scheme sponsors linked to TPT are still waiting for a High Court judgment in Verity Trustees Ltd v Wood, heard over a staggering 32 days in February and March last year. The ruling will decide whether benefits were changed correctly and could add millions to employer obligations.
Among others, the case is about an amendment power preventing detrimental changes to members’ rights, specifically whether this includes future service changes. In a 2023 case involving the BBC Pension Scheme, the High Court and the Court of Appeal agreed that members ‘interests’ were protected from being changed under a similar clause. However, there have been other cases, such as the 2018 case of Wedgwood Pension Plan Trustee Ltd v Salt, where the judge ruled that the wording around rights did not include future benefits.
The TPT judgment will also consider the scope of amendments requiring a section 37 confirmation and whether closure to accrual required a s37 certificate to be surrendered in advance. In the 2024 appeal involving Virgin Media, the court agreed with the High Court that this was required for contracted-out schemes, causing fear among some employers and schemes that they will be hit with unintended extra liabilities. The general outcry eventually prompted the government to promise a statutory override.
