In July 2009 the Pension Trust made the announcement that the Scottish Voluntary Sector Pension Scheme (SVSPS) would close to all future accruals from the end of March 2010. This caused great consternation among the membership and most have been grappling with the difficult issues associated ever since. The closure came following the publication of the results of the September 2008 actuarial valuation in July 2009 which showed that the scheme funding had deteriorated to 68.8% on an on-going basis and a frightening 38% funded on a discontinuance basis (£74m of a deficit!!). The deterioration was partly due to market circumstances but this is far from representing the complete picture. The assumptions set in the 2005 valuation were very much towards the very weak end of acceptable so that when the report was updated these needed to be very considerably strengthened. This, along with the background market position, created a ‘double whammy’ which meant that the scheme was clearly so poorly funded that there was no real option but to close it. Having advised clients on these issues it seems possible that there was an element in 2005 of not wanting to approach the scheme participants asking for significant increases in contributions, in the hope that things might improve before the next valuation. If this was the hope in 2005 then hindsight shows it to have been in vain, only to have deferred the day of reckoning and built up some additional accrued liability into the bargain. Having looked at the contribution requirements for the scheme post closure it looks participants could still be trying to fund the cessation liability in 50 years time with absolutely no flexibility offered by the Pensions Trust to try to contribute at a rate which would reduce the deficit more quickly. Whilst superficially attractive to Employers failing to address the deficit more robustly, I would suggest, is in no-ones long term interests. The last formal actuarial valuation for the SFHA Pension Scheme was carried out at 30 September 2006 and having examined it there are unfortunate similarities with the approach taken in the Scottish Voluntary Sector Pension Scheme (SVSPS). Relatively weak actuarial assumptions and relatively weak mortality assumptions produced a relatively low measure of the value of liabilities and consequently low associated contributions requirements. The 30 September 2009 valuation will be due mid 2010 and I can only see the Scheme Actuary having to grapple with similar issues to those faced by the Scottish Voluntary Sector Pension Scheme (SVSPS). If you factor in the market background over the 3 year period and the very significant trend of falling active membership within the scheme with only 54% contributing in 2008 compared to 62% in 2005 one can only assume that the prognosis doesn’t look good. If the SFHA scheme isn’t forced to close following this valuation, participants can expect a very sharp rise in the contributions required to try to get the scheme back on track, which will be far from welcome news given the funding constraints most are likely to be facing. If this isn’t the position then participants really need to look closely to see if the assumptions used in the valuation represent a realistic view of the position they find themselves in. Does the above highlight a question mark over the governance approach applied to these schemes? It is important that there are structures in place that allow the trustees and representatives of the employers in such schemes to have a robust and open negotiation on funding. In theory scheme committees afford employers a voice in the process but include representatives of other interest groups (e.g. members). Employer, member and trustee views on funding are unlikely to be in exact alignment. As a minimum Housing Association employers in Scotland who participate in the scheme, whether collectively or individually, should seek their own actuarial advice and ensure that they understand both the short and long term implications of any funding proposal from the trustees. Ensuring that such governance questions are addressed is something that I would assume is on these schemes’ agendas already and which the Pension Regulator would rightly expect. The Pension Trust runs a significant number of schemes for organisations who frequently have little pensions experience or access to professional pensions support and they need open and honest communication throughout this process. One can only ask the question how many more of the Pensions Trust schemes find themselves in a similar position and if this whole thing is just an enormous pensions House of Cards?