Registered Providers at risk of pensions contributions increasing by 30%
Many Registered Providers (RPs) may miss the deadline to notify The Pensions Trust (TPT) of their decision to amend their pension schemes and risk an increase in their own contributions of 30% or more. Despite a looming deadline, it may not be too late.
The Social Housing Pension Scheme (SHPS) is facing a substantial funding deficit. This deficit necessitates a dramatic hike in deficit recovery contributions from April 2010, increasing from 4.4% of pensionable payroll to 7.5% of a notional payroll, which will be increased by 4.7% each year until 2023. If current levels of benefits and member contributions are maintained, the real cost to employers could increase by 30% or more.
A lower cost defined benefit structure is to be introduced in April 2010 and a defined contribution alternative will be available from October 2010. TPT has given participating employers until 30 November 2009 to advise of their decision, but this cannot be made by a board of directors before a 60 day formal consultation process has been carried out with employees.
“This leaves little time to devise a strategy, consult staff and agree the final programme. We anticipate the process could take up to five months to complete including the 60 day requirement. If this process has not been started, it is likely that the deadline will be missed and there will be no alternative but to pay substantially higher pension contributions from next April,” warns Chris Murray, director at accountancy and financial services group, Smith & Williamson.
However, if a housing association has not started this process, there is a second chance. Historically, there has been little scope to adopt new benefit structures other than on dates specified by TPT. This will change from April 2010, so that it will be possible to adopt alternative structures from the first day of any month, if appropriate notice has been given to TPT and having completed the formal consultation process.
Smith & Williamson will be hosting seminars in London and Southampton this October to share information with chief executives and finance directors about key financial matters affecting RPs and will be specifically addressing pension issues in January. Anyone interested in attending these events can find more information and register via the Smith & Williamson website, www.smith.williamson.co.uk/events.
For further information contact:
Chris Murray, director, Smith & Williamson Employee Benefit Consultants020 7131 4439 (London)
023 8082 7600 (Southampton)
chris.murray@smith.williamson.co.uk
PR enquiries to:
Jess Koslow/ Kate Harrison 020 7131 4264/ 4228
Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Note to editors
Smith & Williamson is an independent professional and financial services group employing over 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Maidstone, Salisbury, Southampton and Worcester.
Smith & Williamson Limited
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International
Smith & Williamson Financial Services Limited
Authorised and regulated by the Financial Services Authority
