Coronavirus – advice on pensions

Our pensions advisers Isio have outlined some considerations for housing associations to take on board during the coronavirus crisis.

Despite the impact of the coronavirus outbreak, most housing associations will be able to afford to continue to pay pension contributions. However, when reviewing your organisation's cost bases and cashflows, it would be worth including pensions as part of that review. There are some detailed considerations to take into account, including those around furloughed employees.

The Pensions Regulator has responded to the coronavirus crisis by issuing guidance that enables pension contribution reductions – both in respect of Defined Benefit and Defined Contribution schemes – if this is appropriate and necessary in the employer’s circumstances.

The regulator has stated that the best thing for a pension scheme is a strong employer. It wants scheme trustees to be open minded as to what steps might need to be taken, and has set out the due process required to allow any changes. 

Many UK employers have already deferred pension contributions and some have taken a further step to reduce pension costs through a reduction in pension provision.

The fact that many housing associations participate in the Local Government Pension Scheme (LGPS) and/or the Social Housing Pension Scheme (SHPS) makes it more difficult to respond flexibly to coronavirus, and may contribute to a sense that nothing can be done about pensions. This may have been exacerbated by the fact that the schemes’  communications on this have been scheme-focused and have not followed the regulator's lead in acknowledging the concerns and needs of employers.

It is difficult for multi-employer schemes, which have been designed around a low-cost and straightforward operational model, to be responsive in situations such as these, but both the SHPS and the LGPS can be if required. The LGPS in particular, though, has limited resources and their response will depend on the particular fund your organisation is in. If you would like to discuss immediate – or the potential for future – flexibility, we would encourage that you engage directly with the decision makers at the schemes about your organisation’s objectives and requirements.

If you are placing staff on furlough leave, there are some pensions considerations to take into account, such as how furlough payments will be pensioned and whether changes are required to your pensions salary sacrifice arrangements. You should check that these are being considered with those responsible for pensions in organisations.

Particularly in relation to the LGPS and the SHPS, it may be helpful for housing associations to have support centrally from the NHF as a sector-wide body, and we are prepared to have conversations with both the SHPS and the LGPS, supported by our advisors Isio. Before we do this, it would be helpful to hear any feedback from you. If you would like to provide feedback, please email John Butler.

We will consider any responses provided over the next week and let you know about our next steps in a later update.