Pensions are complicated and easily misunderstood. But they are a significant part of employee benefit packages so it is important that your staff understand and appreciate the value of their benefits.

Whether you’re planning changes to your pension provision or simply making sure your pension provision meets the needs of both the organisation and its staff, it’s important to consider how to talk to your employees about pensions.

In our experience, talking to staff about their pensions gives them a real understanding of the value of the benefits you offer them, and helps them feel more relaxed about their future.

Housing associations participating in the Local Government Pension Scheme (LGPS) must show full details of funding position in their annual accounts under the FRS 102 or IAS 19 accounting standards.

Up to now, housing associations participating in the Social Housing Pension Scheme (SHPS) Defined Benefit plans have been able to treat these schemes as Defined Contribution (DC) arrangements for accounting purposes.

However now that FRS 102 has been implemented, they have to disclose the present value of contributions payable under any deficit reduction schedule within the balance sheet – rather than simply recognising actual contributions as an expense in the profit and loss account.

Reductions in the Annual Allowance and Lifetime Allowance mean that more of your employees may be breaching their pension limits. This can result in significant tax increases for them.

This is most likely to affect your executive team, but it can also impact longer-serving staff with significant service in Defined Benefit (DB) schemes, and should be considered as part of your regular pay review process.

The Annual Allowance can come as a surprise for pension scheme members. This is because in a DB scheme, the additional pension earned each year also depends on any increase in pensionable salary, not just the extra year of service.

Bringing together two or more previously independent housing associations is no easy task. There are many issues to consider, and pensions should be an important item on your agenda.

Many housing associations understandably feel trapped in their existing pension schemes. Withdrawing from a multi-employer pension scheme such as the Social Housing Pension Scheme (SHPS), for example, can involve making a large payment into the scheme to secure benefits for all members.

Under SHPS, the trigger for such a termination debt tends to be the date when the last active member leaves the scheme. This debt is not payable incrementally over time; instead it must be paid as a one-off sum based on the ‘insurance cost’ of those benefits. This will be an expensive and significant debt for most housing associations.

For the Local Government Pension Scheme (LGPS), a termination valuation is required if an employer is about to leave the scheme. Many LGPS funds also have a policy of requiring a debt payment when the last active member leaves, and will set this figure close to the insurance cost of securing benefits.

Different LGPS funds have different policies governing when they trigger the debt and how it is calculated. It’s important to plan ahead and set an appropriate mitigation strategy.

With a number of pension scheme options available to housing associations, it can be hard to review pension provision and work out whether you are making the right choices.

The housing sector is dominated by two pension schemes:

• The Social Housing Pension Scheme (SHPS) – a private sector, industry-wide scheme administered by The Pensions Trust with several defined benefit sections and one defined contribution section.
• The Local Government Pension Scheme – a public sector scheme consisting of 99 regional funds, each run by a local authority. The benefits and member contributions payable are set out in government regulations.

However, some housing associations use:

• The Growth Plan, run by The Pensions Trust
• A group personal pension or stakeholder plan
• A master trust DC scheme
• A bespoke occupational pension scheme, which may be Defined Contribution or Defined Benefit.

Applicable to both Defined Benefit and Defined Contribution schemes, salary exchange (or salary sacrifice) makes pension contribution payments more efficient for both employers and employees.

It achieves this by reducing the amount of National Insurance (NI) contributions payable.

Employees agree to a reduction in salary equal to their pension contributions, and in return the employer makes an additional contribution to the scheme equal to the salary given up.

NI contributions are based on overall earnings, so a lower salary produces NI savings for both employer and employee.

The contribution paid to the pension scheme remains unchanged, but the employee benefits from higher take-home pay and the employer pays less NI.

Some employers use a proportion of their NI savings to enhance benefits for employees, resulting in improved benefits for staff.

As falling income and rising costs continue to take their toll on the third sector, many charities are reviewing their pension provision.

But costs aren’t the only challenge. A good quality pension scheme can be a powerful tool in attracting and retaining the best people.

Whether they participate in a multi-employer Defined Benefit scheme or run their own, charities have to weigh up the risks against the scheme benefits and their own charitable aims.

The NHS Pension Scheme is a key part of the total reward package that NHS trusts use to attract and retain staff.

However, the impact of pension tax allowances – including the Annual Allowance – on consultants and senior clinicians has heightened pension anxieties in the workforce. And beneath this headline issue lie other worries, such as the court ruling on age discrimination around the change to career average benefits and changes to the State Pension Age. NHS employees at every level need guidance on these uncertainties.

Many employees find pensions confusing, and this can undermine the immense value of the NHS Pension Scheme in recruiting and retaining the best employees. With an employer contribution rate of over 20%, it’s essential that HR and finance teams communicate the value of the Scheme and clarify any misunderstandings.

In recent years, trade union members across the economy have faced an onslaught of pension uncertainties. Changes to pension schemes and to the State Pension Age, for example, can be deeply worrying, and many people turn to their trade union for support.

Trade unions have always fought hard to provide and maintain decent pension provision. They support their members by providing information, helping them resolve individual pension issues, and representing them when changes are proposed and implemented.

Keen to defend their members’ interests, many trade unionists nevertheless struggle with the complexities of the pension world.

Organisations that undertake the running of services outsourced by local authorities find themselves with employees who have all the skills and knowledge needed to do a great job from the start.

But as admitted bodies providing employees with access to the Local Government Pension Scheme (LGPS), many encounter unexpected liabilities that can prove costly.

Substantial scheme deficits and yearly hikes in contribution rates are a financial strain that few admitted bodies can ignore. And specific risks such as cessation debts and early retirement entitlements in redundancy programmes can come as an unpleasant surprise.

Even the most skilled finance directors can struggle with the complexities of Defined Benefit schemes. Without specialist knowledge, they may end up with more liabilities than they bargained for.

As independent schools absorb the impact of Teachers’ Pension Scheme (TPS) contribution increases, many are reviewing this critical area of staff remuneration. Some are also looking for guidance in the funding and governance of their in-house Defined Benefit and Defined Contribution schemes.

These pension challenges occur at a time of unprecedented financial pressures for the sector. Developments such as VAT on fees and the removal of business rates relief add to the risk factors schools face. And a whole range of school-wide priorities – not least infrastructure and refurbishment projects – are competing with pensions for resourcing.

If yours is one of the housing associations that participates in the Local Government Pension Scheme (LGPS) or the Social Housing Pension Scheme (SHPS) then you may not always have the control you need. Worsening valuation results may be heightening your concerns.

Is your Housing Association running its own Defined Benefit or Defined Contribution scheme? If so, do you have the resourcing in-house to manage them as well as you’d like?

Many not-for-profit employers view pensions as instrumental in the battle to recruit talented employees. They believe that staff wellbeing is central to their positive role in society – with pensions playing an important part.

But as scheme contributions increase and budgets tighten, many in the not for profit sector are forced to balance their pension provision against the organisation’s core mission.

At First Actuarial, we support not-for-profit organisations through scheme changes, helping them give their valued staff the best possible pensions.

We also advise charities and not-for-profit organisations on how to invest their assets.

• We are a leading provider of pensions advice to the not-for-profit sector. We offer considerable experience of supporting not-for-profit organisations and their pension scheme members through change.
• We offer an appropriate mix of actuarial, administration and investment advice, infused with our in-depth knowledge of the not-for-profit sector.
• We help organisations struggling with the challenges of multi-employer schemes, such as the Local Government Pension Scheme (LGPS), the Teachers’ Pension Scheme (TPS) and the Social Housing Pension Scheme (SHPS). We work with trade unions tackle the pensions issues their members face. And we advise on the tax issues confronting NHS employees.
• We also work with both employers and trustees of individual pension schemes.
• We put people first. We give clients face-to-face advice and support at every stage of our work.
• We deliver cost control and value for money. We are transparent and fair on fees, and where possible we charge on an agreed fixed-fee basis.