New arrangements for the Social Housing Pension Scheme (SHPS) are due to come into effect in April this year.
Following a two-year review and consultation with both employers and employees, employers offering staff access to the industry scheme, could select which of three benefits structures they wished to apply to their organisation. These consisted of the existing final salary scheme with 1/60th accrual rate, a final salary plan with 1/70th accruals and career average revalued earnings (Care) scheme with a 1/60th accruals structure. Employers will be able to operate different benefit structures for existing and new employees.
The 700 housing groups, which are served by the scheme, had until October last year to make their selection, before the changes come into effect in April.
The numerous reasons behind the changes include counteracting the high cost of providing the current level of benefits, rising costs for employers who participate in SHPS and financial pressure within the Social Housing Sector due to a number of government efficiency initiatives. The scheme also has a £283m deficit.
All employers chose to retain defined benefit pension arrangements for existing members, with 92% retaining final salary schemes with a 1/60th accrual rate. Nearly all (99.2%) of employers will also†continue to offer defined benefit pension arrangements to new employees. Of these, 56.5% will offer final salary with 1/60th accruals, 9.6% will offer a final salary plan with 1/70th accruals and 33.1% will provide a Care scheme for staff. Just 0.8% of employers have closed SHPS arrangements to new employees.
No employer has closed the scheme to future accruals for the existing members of SHPS and pension benefits earned up to April 2007 are safeguarded.