Update on the pension benefit review, Social Housing Pension Scheme, and new regulations

TPT benefit review

TPT Retirement Solutions have now released the draft Court papers for the ongoing benefit review. The detailed draft Court papers were sent to TPT scheme employers at the end of the week beginning 14 November, providing employers with an opportunity to comment. 

Given that the matters under review are common to most all employers using TPT, there may be benefits in working as a group. Isio and Devonshires are working together to offer joint support to employers. Any NHF member is free to join this group at phase one or two – please get in touch via our contact form if you would like to find out more.

Hedging and LDI investments

Unlike the Local Government Pension Scheme (LGPS), both the Social Housing Pension Scheme (SHPS) and other TPT sections use leveraged financial instruments to hedge against interest rates, which will have led to a much lower reduction in deficits, all else being equal. It also means that some TPT schemes may have lost hedging and so are less well-funded than expected. In any case, investment strategies are likely to have lower expected returns as the interest rate hedges require much more collateral.

The majority of affected Trustees will have engaged with their employers by now. However, it is not currently clear how the SHPS has been affected. Isio can help housing associations to engage with TPT and assess the implications. 

New funding and investment regulations due in 2023

Following on from the Pension Schemes Act 2021, the Department of Work & Pensions ran a consultation, which closed in October, on the new funding and investment Regulations. Isio has supported the NHF in responding to the consultation on behalf of the sector.

We currently expect the Regulations to come into force for valuations with effective dates in late 2023. The Pensions Regulator has yet to consult on the code of practice it will use to put this into practice.

The draft Regulations are consistent with the general message that defined benefit pension schemes should have a plan to reach full-funding on a low risk basis. This will have significant consequences for employers if no mitigation is able to be put in place.

Isio is one of the country’s leading independent pensions advisory firms, known and respected for its agility and the team has more than 1,000 client relationships. We're working with our pensions advisers Isio to keep the sector up to date on key areas affecting housing associations.