UK - The Social Housing Pension Scheme is to increase member and employee contributions by up to 2.2 percentage points after a six-fold increase in its deficit.
The £650m scheme’s triennial review showed the deficit had soared from £19m deficit in September 1999 to £117m in 2002.
The Pensions Trust, which runs the scheme, said increased longevity had placed a major strain on the scheme and had led to the spiralling deficit.
The Pensions Trust consultant Trevor Smith said: “The major impact was longevity. The impact on the investment performance has been marginal – the cash flow has been very strong.”
The scheme – which was formed in 1977 – currently has 22,799 active members, 3582 pensioners and 12,290 deferreds; the average age of members is 43.
Smith explained: “It is a very immature scheme and the pensioners represent a very small part of the whole fund.”
Employer contributions are 10.6% of pensionable salaries, while member contributions are 4.5%, but joint contributions will rise by 2.2 points unless the scheme moves ahead with proposals to reduce ill-health benefits. If The Pensions Trust cut ill-health benefits, the total increase would be 1.9 points.
The exact size of the increase – and how it will be split between employers and members – will be revealed in June. Any increases in contributions or benefit adjustments will be effective from April 2004.
Of the 702 employers that contribute to the scheme, several have stopped offering membership to new employees over fears of contribution increases. These include Shaftesbury Housing Group, Atlantic Housing Group and St Pancras & Humanist Housing Association.
But Smith stressed the total number of schemes that had taken this course of action was “under 10”.
The scheme’s current asset allocation is 68% in equities and property and 32% in gilts and cash.
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