On the go: The Scottish Housing Associations’ Pension Scheme deficit will be wiped out in September 2022, ahead of schedule, according to its 2021 valuation results.
First reported by Inside Housing, the scheme’s September 30 2021 valuation saw an improvement in its funding level to 98 per cent, from 88 per cent as of September 30 2018.
A spokesperson for TPT Retirement Solutions, which administers the scheme, attributed the improvement in the funding position primarily to the scheme’s investment strategy and its employer contributions.
“The scheme and employer committees, representing the trustee and the Shaps employers, respectively, have agreed that the reduced deficit will be cleared by the deficit contributions payable under the 2018 recovery plan, which ceases on September 30 2022,” the spokesperson told Pensions Expert.
“The committees will continue to monitor the funding position of the scheme and maintain an open dialogue ahead of the 2024 valuation.”
In order to reduce the scheme’s liabilities — and therefore the deficit — the employer committee was able to agree with the scheme committee to increase the initial discount rate, while “still allowing for prudence in the expected return from assets held within the scheme”, according to the latest valuation results. They also agreed to adopt new 2021 mortality improvement tables.
Inside Housing reported that the scheme’s funding level has previously been a cause for concern, with the funding level sitting at 76 per cent in 2015 and its funding deficit at around £200mn.
Since then, all defined benefit employers have been paying deficit recovery contributions, which, according to the 2021 update, were initially set at £31.1mn a year, increasing at 3 per cent every year in a bid to clear the deficit. These payments sat at £33mn from April 1.
In 2018, the scheme had a funding deficit of £121mn, according to the latest valuation. This stood at £27mn in 2021.
“There has been a significant change in market and financial conditions since the 2018 valuation, including a fall in government bond yields, which increased the value of the liabilities by £183mn,” the update read
“Investment returns have been better than expected since the last valuation, returning an average rate of 9.64 per cent per annum over the inter-valuation period. The investment outperformance improved the funding position by £202mn.”
There will be no deficit contributions due from October 1 2021 and the scheme’s position will be reassessed at its next valuation in 2024.
