The valuation results show that the Scheme’s funding position has improved significantly from the last valuation in 2020 with the deficit reducing by over 55% from £1,560m to £690m, a fall of £870m. The 2023 position is ahead of the target previously set and, as a result, deficit contributions being paid into the Scheme will reduce from April 2025 by 12%.
Following a collaborative and thorough consultation exercise managed by TPT, the SHPS Employer Committee (representing both large and small housing sector organisations) and the SHPS Scheme Committee (which acts on behalf of the Scheme Trustee) reached agreement on the funding position of the Scheme and the contributions to be made by the employers going forward. The agreement combines a prudent funding approach, to protect member benefits and the long-term funding of the Scheme, with a significant reduction in the total deficit contributions being paid to the Scheme.
Affordability has been a key focus of discussions between the committees, given a backdrop of employer cash constraints and sector spending priorities, including housing safety and maintenance, and reducing carbon emissions.
The new recovery plan, which sets out the contributions required from employers to remove the deficit over time, will commence in April 2025 and will replace the existing plan agreed in 2021. As well as deficit contributions being lower, they will also increase at the lower rate of 2% p.a., down from 5.5% p.a. The recovery plan end date will remain at 31 March 2028.
There has been a substantial change in market and financial conditions since the 2020 valuation. Despite significant market volatility, the Scheme’s funding position has improved and the deficit has reduced by £870m. This move is mainly driven by the Scheme’s investment strategy and contributions from employers, partly offset by higher observed inflation and salary increases and an adjustment made to fully allow for the Government’s changes in the method of calculating RPI inflation.
TPT communicated the positive results to Scheme employers, and hosted a webinar for over 200 employer contacts, on 8 August 2024.
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