SFHA has submitted a response today to a consultation by the Scottish Public Pensions Agency proposing to change regulations around exit credits for Local Government Pension Scheme members.
SFHA was not listed as a consultee for this consultation, despite a number of Housing Associations being potentially impacted by this policy change.
The current employer-friendly regulations on paying out exit credits are planned to change on 29 June 2024 to move in line with England & Wales where the funds have ‘discretion’.
We were alerted to this consultation by the Scottish Borders Housing Association just ahead of the deadline and have expressed our concern that proposals may negatively impact on some of our members.
When an employer exits the Local Government Pension Scheme (Scotland) (“LGPS Scotland”), an assessment of its funding position is undertaken.
In this assessment, the value of the exiting employer’s share of assets is compared to the value of the employer’s liabilities, commonly calculated on a ‘low-risk’ set of assumptions.
Prior to June 2018, the risk faced by an employer exiting the LGPS Scotland was asymmetric.
- If the exit assessment indicated that there was a deficit, i.e. that the value of the assets was lower than the value of the liabilities, then the exiting employer was required to pay an exit payment equal to the deficit.
- If the exit assessment indicated that there was a surplus, i.e. that the value of the assets was more than the value of the liabilities, then the exiting employer was not entitled to receive an exit credit equal to the surplus.
In June 2018 this asymmetry was recognised, and Regulation 61 was included in the ‘Local Government Pension Scheme (Scotland) Regulations 2018’, which permitted an exiting employer to receive payment of any exit credit.
Our concern is that proposals in this consultation appear to look likely to re-introduce this asymmetric risk for employers, by giving an administering authority a broad discretion over the amount of exit credit payable – if any.
We have responded that the existing approach to determine exit credits, introduced in June 2018, is fit for purpose and would be concerned about the impact on our member housing associations of the proposed change and the re-introduction of an asymmetric risk.
For more information in relation to this matter contact Susie Fitton, Policy Manager, sfitton@sfha.co.uk
