Last month, a team from LCP's Social Housing Practice attended the National Housing Federation's Housing Finance Conference in Liverpool. It was a great event, and as a team we enjoyed attending for the first time since being appointed as the Federation’s preferred supplier for pensions advice.

This is a challenging time for housing associations with high interest rates, housing conditions, building safety and political uncertainty putting increasing pressures on their finances and business models. The conference had incredibly wide breadth – covering all aspects of housing finance, from rental payments, to housing management, to ESG issues and (most importantly – but perhaps we’re biased...) pensions.

As a newer member of the team, it was interesting hearing more about the challenges facing the sector, but to also see the positivity and appetite for seeking opportunities – not just in terms of pensions but also the wider issues affecting the sector, such as decarbonisation, with our LCP Delta colleague Katharine Blacklaws joining us to share her insights from the energy sector.

Reflecting on the event there were key themes that came out of the day around housing associations and their pension schemes.

DB pensions

For housing associations with participation in the Social Housing Pension Scheme (SHPS), the latest valuation as at 30 September 2023 is currently underway, and a key talking point was what this might mean for the housing associations that participate in the SHPS defined benefit (DB) section.

Our view is that we expect the overall SHPS DB deficit to have halved compared to three years ago, mainly due to changes in market conditions over the period, and the contributions that housing associations have paid. Our “What we can expect from the SHPS valuation 2023?” flyer gives more detail on the impact this may have in terms of the deficit and future service contribution rates paid by housing associations.

The big potential opportunity however, is the possibility of settling SHPS DB liabilities at a much-reduced cost, which our colleagues Mike Richardson and Tim Gilbert discussed during their conference talk. Exit payments to the SHPS DB section are likely to have reduced by over half compared to three years ago which presents a significant opportunity for housing associations considering an exit from SHPS entirely.

For housing associations participating in the Local Government Pension Scheme (LGPS), there have also been significant improvements in the funding levels of many funds. There are plenty of opportunities available, and we have helped many housing associations to exit at a much reduced or nil cost, and sometimes even receiving a surplus back as a refund. Many of the housing associations we spoke to were keen to explore how to review their options.

DC pensions and financial wellbeing 

For many housing associations, there has been a trend away from defined benefit (DB) to defined contribution (DC) schemes over recent years and this was reflected in many of the discussions we had with visitors to our exhibition stand.

There were also a number of conversations around how housing associations can better support employees in saving for retirement, whether that be from increasing employee engagement and awareness, or from reducing the number of employees opting out of pension arrangements all together.

Our colleague Richard Soldan spoke at a pensions workshop on the second day of the conference, about the future of pensions. One of the key themes of this discussion was taking opportunities and being proactive – pensions can sometimes be pushed down the priority list, but there are benefits to be gained for housing associations and their employees from taking a more positive approach and exploring the opportunities that could be out there – all with the aim of providing better pensions more effectively and efficiently.

Climate and sustainability

Our LCP Delta colleague Katharine Blacklaws joined us on our stand, bringing insights from the energy sector and discussed decarbonisation, key challenges faced by housing associations and what they can do to work towards meeting their sustainability goals. For example, in retrofitting housing stock to increase energy efficiency, by installing low carbon heating options such as heat pumps, and the associated costs with these large-scale projects.

Overall the event will have given the sector a lot of food for thought and it’s clear there are key issues for housing associations to be tackling when it comes to pensions and sustainability.