Rob Griffiths, Deputy CEO and Chief Financial Officer of Longhurst Group and Chair of the SORP Working Party, provides an update on potential changes to the Social Housing Pension Scheme.
6 July 2017
Employer members of the Social Housing Pension Scheme (SHPS) will no doubt be aware of the possibility in a change to the way we account for multi-employer defined benefit pension schemes.
The prospect of a change was first raised at the Federation’s Housing Finance Conference in March earlier this year. Since then much work has been undertaken by the SORP Working Party, PwC and the Pensions Trust (TPT).
The focus of the work from the SORP WP and TPT has been on trying to determine if it will be possible to produce the information that will enable each employer member to account for their share of assets and liabilities fully as a defined benefit scheme.
While we are not yet at a point where we’re able to say that the information is available or can definitely be produced, we’re becoming increasingly confident that this is something that will soon be achievable – possibly in time for years ending on or after 31 March 2018.
Why might there be changes?
One of the questions that has quite rightly been posed in respect of this work, is ‘why are we looking at changing and what will the benefits be’? This is a completely reasonable question, especially when it was only in the 2015/16 accounts that we recognised the past service deficit of the SHPS defined benefit schemes as a liability on balance sheet.
The move to bring the past service deficits on balance sheet was undoubtedly a significant improvement from the information that was published prior to the introduction of FRS 102, it still results in a position where the valuation is only updated once every three years as part of the triennial revaluation. Where there have been significant changes in actuarial assumptions, the performance of scheme assets or the membership profile by participating member, then this could (as has often been the case) result in significant movements from one triennial revaluation to another.
A move to reflect the net position by employer on annual basis does still carry the risk that the results are based on a snapshot of the information at a point in time and could be impacted on by the timing of key events. However, it must surely be the case that having access to information pertaining to the performance of the SHPS defined benefit pension scheme on an annual basis would be an improvement on what we currently have. It will also ensure that boards and other key stakeholders have better information on one of the key liabilities which exist on our balance sheets.
There are a number of key steps to be met over the next few months before we can be sure that a methodology can be developed and the information will be available to enable the defined benefit scheme to be fully accounted for as a defined benefit scheme in accordance with FRS 102.
We expect to be in a position to provide a further update during the autumn ahead of any changes that may come in for March 2018 year ends – and will include this in the next issue of the finance newsletter.