£750m SHPS deficit on track to be cleared by 2028

This shortfall should be covered by the contributions associations are currently paying.

In response, TPT said the plan agreed at the last actuarial valuation was on track to clear the deficit by the agreed end date of 31 March 2028.

Mike Richardson, head of LCP’s social housing practice, said: “The key driver in the results is the huge increase in long-term interest rates, which has led to a material shrinking in the size of SHPS.

“In fact, we estimate that it is now back to around the size it was in 2011. For many organisations, the improved funding position may make options available which weren’t there previously.”

Mr Richardson explained that, for a typical association, its exit debt would be less than half the equivalent figure three years ago, at the time of last valuation, which could make this amount more affordable.

Richard Soldan, head of LCP’s not-for-profit advisory team, said: “Another consideration is those employers who still have employees building up new defined benefit pensions. On an all-else-being-equal basis, we would expect the total cost of providing these benefits to have broadly halved.

“The reaction of employers is likely to depend on how increases at previous valuations were dealt with – were increases met solely by either the member or the organisation, or was the pain shared? Given the scale of the likely changes, we recommend that employers in this position start considering their options as soon as possible.”

Andy O’Regan, employer and strategic partnerships director at TPT Retirement Solutions, said: “The significant changes in market conditions we have seen since the 2020 valuation have contributed to making the deficit smaller.

“As it stands, the deficit reduction contributions that employers have made under the recovery plan agreed at the last actuarial valuation are on track to clear the deficit by the agreed end date of 31 March 2028.”

Mr O’Regan explained that the actual valuation position would depend on market conditions on 30 September 2023 and the outcome of discussions between the SHPS employer committee and the trustee body.

He added: “TPT has scheduled a series of webinars over the next nine months to update employers on the profile and ongoing strength of the scheme, the valuation process, the valuation outcome, the long-term strategy of the scheme, and also collective [defined contribution] as a potential option available to employers for future pension benefit provision.”