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£1bn pension shortfall may affect housing associations’ plans to tackle housing shortage (29 September 2014)

Date: 29/09/2014
Duncan Lewis, Legal News Solicitors, £1bn pension shortfall may affect housing associations’ plans to tackle housing shortage

A shortfall in the Social Housing Pension Scheme has raised concern that some housing associations might have to curtail their plans to build more new homes.

Online publication efinancialnews.com reports that analysis by pension consultants LCP’s not-for-profit sector has suggested that a £1 billion shortfall in the pension scheme in 2011 could have grown even larger.

Head of LCP’s not-for-profit’s sector, Richard Soldan, has said that when an update on the Social Housing Pension Scheme is announced on 30 September, the shortfall is expected to be as much as £1.2bn.

Housing associations offer housing to mainly low-income rental tenants – and have set out proposals for tackling the UK’s shortage of affordable housing by estimating that they could build up to 120,000 homes every year until 2033.

Some housing experts estimate that 250,000 new homes need to be built every year to tackle the UK’s housing shortage and growing population – meaning housing associations are proposing to build around half of the new housing stock required in Britain.

Investment in housing associations has been forthcoming in recent years – companies like Legal & General and insurer Pension Corporation have both loaned £50m to housing associations.

Soldan said, however, that whereas many housing associations ran their own pension schemes or were able to meet their obligations – the 2013 annual report on the Social Housing Pension Scheme had shown that 70 out of 473 housing associations in the scheme had a higher risk of not being able to meet their obligations to the pension scheme.

The scheme is administered by the Pensions Trust, which has not commented on the shortfall

Some of the housing associations concerned had been asked to supply evidence they are able to meet their obligations to the scheme – or switch employees to another pension scheme involving non-guaranteed defined contribution pensions.

There are also concerns that changes under the Welfare Reform Act could also impact on the finances of housing associations, as housing benefit previously paid directly to landlords by the government is now paid directly to social housing tenants to pass on to their landlords.

If social housing tenants fall into rent arrears, this might impact on the income of housing associations acting as their landlords.

However, the government’s regulator of housing associations said that it was not anticipated housing associations would encounter difficulties paying into pension schemes.

Deputy director of strategy and performance at the UK government’s Homes and Communities Agency, Jonathan Walters, said:

“A billion-pound deficit is material in anyone’s book, but compared to an overall surplus in the sector’s budget of £1.9 billion – and about £60 billion to £70 billion in outstanding debt – it is manageable.

“I don’t think it’s at a scale where it could affect the viability of associations, but it could impact their risk appetite.

“It is one of the things we are trying to make sure is on the associations’ agendas.”

Duncan Lewis Housing Solicitors

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For expert legal advice on housing law, contact Duncan Lewis housing solicitors on 020 7923 4020.

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