Wednesday, June 28, 2023

"What lies ahead for housing associations with pension obligations?"


So check out this report by (pay wall) May 24 2023 that DB pensions obligations "likely to have reduced by more than 50%" and due to surpluses in the Local Government Pension schemes "We expect significant reductions in net balance sheet FRS 102 obligations"

So why is Clarion Housing Group wanting to close its DB Pension provision, breaking legal promises to its staff and condemning them to poverty in their old age? No wonder there will be a strike ballot next week.

"There is a lot for housing associations to consider this year end with respect to defined benefit (DB) pensions accounting.

This is set against the context of rising interest rates and DB pension obligations likely to have reduced over the year to 31 March 2023 by more than 50 per cent.

The net balance sheet position, however, will be very dependent on a scheme’s investment strategy and how the supporting assets have fared over what has been a very volatile year.

First of all, the income and expenditure (I&E) service cost for the 2023-24 financial year is likely to fall for those still open to the build-up of new DB benefits.

This could perhaps be by as much as 60 per cent or more, but the change in interest cost is again dependent on investment strategy and the net deficit or surplus position.

However, there are a number of factors to be considered depending on the circumstances of the housing association, including those set out below.

Divergence between LGPS and SHPS

With asset values holding relatively steady for those in the Local Government Pension Scheme (LGPS), we expect significant reductions in net balance sheet FRS 102 obligations for many housing associations.

In fact, many organisations in LGPS may have assets exceeding liabilities on an accounting measure and, for the first time in a while, will be looking at whether a balance sheet pensions surplus can be recognised.

For housing associations in the Social Housing Pension Scheme (SHPS), the reduction is likely to be smaller as investment hedging strategies will have dampened the net effect of rising bond yields..."

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