Pension perils and pension possibilities in 2020

It may form the last page of the publication, but pensions once again features in the Sector Risk Profile released by the Regulator of Social Housing late last year.

The Regulator is taking another opportunity to remind RPs that they need to understand their risk exposure in defined benefit pension schemes and their impact on cash flow, and highlighting those organisations running low-margin operations as likely to be most affected.

2019 saw the SHPS contribution rate changes take effect following the latest triennial valuation and defined benefit accounting being applied for the first time. Several more bulk transfers out of SHPS were also completed.

For LGPS employers, the focus during 2019 was more on what to expect rather than on things which actually happened in the year. For example there was consultation, but as yet no outcome, on introducing formal mechanisms for exiting without an immediate lump sum payment being triggered, and the latest scheme triennial valuation was triggered which will lead to new contribution rates being set from April 2020. In setting those rates, LGPS funds will have to factor in the potential impact of the McCloud judgement, following the Government’s application to appeal the decision being rejected last summer.

The clients that we are working with are exploring a wide range of options to manage their pension liabilities and 2019 was no different in that regard. During 2019 we:

  • completed the second bulk transfer from SHPS to another pensions scheme outside of the TPT framework. Meanwhile we are actively working on another bulk transfer which will be from SHPS to another TPT scheme
  • secured a subsumption arrangement for an RP client, under which their assets and liabilities in the Hertfordshire LGPS were transferred within the LGPS Fund to the Local Authority, mitigating the risk of the full c. £2 million exit liability crystallising and becoming payable when it’s last active member left
  • advised on several Funding Arrangements for clients in the LGPS
  • advised and assisted on a client’s exit from Growth Plan
  • advised a client on the effectiveness of a historic amendment to the rules of their own pension scheme
  • responded to the LGPS consultation on risk-sharing
  • helped a client close the LGPS to new entrants and simplify its defined contribution offering to a single scheme
  • advised a client with its own scheme on putting in place a mechanism to reduce its employer contributions by providing additional security to the scheme

If you are looking at your organisation’s pensions strategy in 2020 and want some advice and support around the legal restrictions on what you can do and/or the legal mechanics for what you want to do, then please get in touch with a member of the Employment & Pensions team.


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