The Social Housing Pension Scheme (SHPS) Pensions Committee has published the latest valuation results and information on proposed future service benefit changes.

Valuation results

The deficit of £1.323bn in 2014 increased to £1.522bn in 2017, and the impact on deficit contribution will grow over time as the previous tiered structure has been replaced. Under the old structure, deficit contributions stepped down over time as the tiers fell away.

Under the new structure, there is no step-down over time. Deficit contributions are now fully based on the share of an organisation’s liabilities, and increase at 2% p.a. Under this new schedule, deficit contributions will be payable from 1 April 2019 to 30 September 2026. There is an overall increase of 60% in total contributions over the term of the new schedule, when compared with the previous contribution schedule in place.

As well as the changes outlined above, the end of contracting out in April 2016 increased the level of National Insurance contributions required by both employers and employees.

Impact on people

Changes to future benefits building up came into force from July 2019, with future service contribution rates for the different benefit options increasing as shown below:

  • 60ths final salary: from 20.6% to 27.2%
  • 70ths  final salary: from 17.7% to 23.4%
  • 80ths final salary: from 15.5% to 20.5%
  • 60ths CARE: from 16.7% to 22.1%
  • 80ths CARE: from 12.6% to 16.7%
  • 120th CARE: from 8.6% to 11.3%

The closed employer loading payable by an employer (whose SHPS DB participation does not accept new entrants), in addition to its future service contribution rate, reduced from 2.5% p.a. to 1.1% p.a. of pensionable pay.

These changes will lead many employers to reconsider the range of options that are offered to staff under the scheme and the related employee contributions. Careful communication with staff about these changes will be extremely important as there could be a significant impact on members’ benefits.

Financial impact

Following the 2017 valuation, scheme expense contributions increased to £1,900 p.a. per employer and £75 p.a. per DB member. Housing associations should consider the impact of all contribution increases on 30-year business plans and any associated stress testing.

When recognising SHPS exposure in financial statements under FRS102, the old method of using the multi-employer exemption for SHPS has ended, and there has been a transition to full defined benefit accounting from year-ends 31 March 2019 onwards. This means that the liability recognised on the balance sheet is the expected present value of future benefit payments.


Housing associations will be aware that some SHPS employers have taken control of financing benefits and risk management by transferring a proportion of their section out of SHPS and into their own scheme. This brings increased control over an employer’s funding and investment strategy, a freedom to access the whole DC market, and choice over form and level of member benefits, but should be balanced against the cost of implementation.

If an employer decides to stay within SHPS, there are choices to be made around benefit structure and where it sits in the overall pension strategy. All options should be considered carefully from a people, finance and governance perspective.