As has recently been reported in the Housing press, Southern Housing Group has become the latest RP to exit from the Social Housing Pension Scheme (SHPS).
Katie Maguire, a Solicitor in the Employment and Pensions team here at Devonshires, supported Southern on the legal aspects of this transaction, which was the first to do a bulk transfer into a scheme outside of the TPT framework. Here, Katie talks through some of the key considerations in a project of this nature.
Sector Risk Profiles have repeatedly flagged pension liabilities as a key sector risk that Boards need to be aware of and to manage. There have been several Bulk Transfers out of SHPS which have been announced in this financial year and they have inevitably attracted considerable attention, not least from other employers remaining in SHPS. The most recent to be announced was that of Southern Housing Group, which Devonshires acted on as legal advisors.
First it is important to note that Bulk Transfers will not be suitable for all RPs. The Trustees of SHPS have to agree to the Bulk transfer and they will only do that if they are satisfied of:-
- the strength of the employer who wants to exit i.e. whether it is sufficient to support the transferring pension liabilities
- the strength of SHPS pre and post the employer’s transfer i.e. would the exit adversely affect the security of the benefits of the members remaining behind
- the benefits for members provided in the new scheme being of at least equal value to those provided through SHPS
- the benefits for members provided in the new scheme being at least as secure as provided through SHPS’
The terms of the transfer will be reflected in a Transfer Deed. Where transferring into another scheme outside of the TPT framework, the Trustees of that scheme will also have to agree and it may be necessary to draft new rules for the receiving scheme. There are various other complicated areas which will need to be addressed, including how to deal with the balance of powers between scheme trustees and employer, ‘split service’ members, annual allowances and what any residual exit liability should be.
The amount of work in a project like this should not be under-estimated, but working with an advisor who has been through it before can bring significant benefits. And whilst Bulk Transfers won’t be suitable for all, there are a range of other options which can be considered to manage and mitigate pension liabilities and the experienced Devonshires Employment and Pensions team is working with many RPs in delivering what works best for each of them.
For further advice, please contact your usual contact in the Employment and Pensions Team.