UK - Soaring final salary pension costs and government spending caps could cripple housing associations.
The associations – registered charities set up to provide affordable housing – say they are being “squeezed” by the desire of local authorities and the government to maintain caps on rent increases.
As a result, associations have no way of offsetting their rising pension costs.
Elim Housing Association finance director Ed Shorney said: “Like all employers, there’s a pensions shortfall. At this point, we as an association don’t see a significant problem for ourselves as we are a new scheme.
“But we’ve flagged it as a potential risk. Everybody is concerned about this because employers’ schemes are, in the main, underfunded. We’re relatively fortunate, but for housing associations running mature schemes it is a real issue.”
Cara Irish Housing Association finance director Charles Oganya agreed and said associations like his hoped the improvement in equity markets would ease their funding pressures.
The association is part of the £2bn Pensions Trust, which is due to raise its employer contributions by 1.1 percentage points to 10.6% in April.
Research from consultant Hazell Carr shows that 54% of associations are concerned by their pension costs. It also found that 58% of associations plan to review their schemes within the next two years.
Hazell Carr partner Mark Riches said: “Like a lot of public sector organisations, they’re being squeezed at the top by government cost controls and at the bottom they are being pushed by increasing expenses.
“Pensions are a really significant expense, and they’re all feeling the pain. They feel that having a final salary scheme is a worry and a possible threat to housing associations.”
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UPDATE 2 - DWP publishes DB white paper: Stronger powers for TPR, DB chair statements to be introduced
The Pensions Regulator (TPR) will be given the power to fine company bosses who deliberately puts their defined benefit (DB) schemes at risk, the government has confirmed.