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Finance policyQuarterly update

Winter 2011-12

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Finance policy quarterly updateWinter 2011-2012 edition

National Matrix of Property Components‘Mind the gap!’ 30%memberreduction

Use National Matrix of Property Components to assist you to split property values into constituent components

• Housingassociationsarepreparingtheirfirstsetofcomponentaccounts

• Gapsininternalrecordsmeaninsufficientdatatovaluecomponents

• TheFederationandsurveyorsSavillshavepublishedtheNationalMatrixofPropertyComponents

• Saveyourassociationtime,costandeffortinadoptingnewcomponentaccountingrules

What can the matrix do for you?Thematrixwillactasaready-reckonerforpropertycomponentsevaluationandwillhelptobringaboutgreatercompliance.

Associationsareadvisedtoagreeinadvancewiththeirauditorstheextenttowhichthematrixcanbeusedasasuitablebasisforestimatingcomponentvaluesfortheirpropertyportfolio.

Listprice £99+VATMembersprice £65+VAT

How to purchase the matrix?

The matrix can be downloaded from the National HousingFederation wesbite www.housing.org.uk/publications

www.housing.org.uk, tel: 020 7067 1048, email: [email protected]

Depreciation Matrix

2011

55%mem

ber

reduction

The National Housing Federation is pleased to annouce the

publication of the new Depreciation Matrix, which has been

provided by Jones Lang LaSalle.

List price

£40 + VAT

Members price £15 + VAT

How to purchase the matrix?The matrix can be downloaded from the

National Housing Federation wesbite

www.housing.org.uk/publications

www.housing.org.uk, tel: 020 7067 1048, email: tahera.merali@housin-

How does the matrix benefit you?

The matrix provides details of land values as a percentage of vacant

property possession value for every local authority in England.

There are different percentages for houses and flats.

The Federation reminds associations

that the matrix should only be used in

the absence of more accurate local

data.

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Contents

1 Introduction 4

2 Welfare reform 6Federation fights on following bedroom tax winUnder-occupation bedroom taxOverall benefit capDirect payments

3 Investment 8Funding future homes

4 Taxation 9VATPeople’s taxTax helpline for Federation members

5 Accounting 12IFRS convergenceAccounting for the new investment frameworkTSA consultation on the new Accounting Direction

6 The Federation’s 30th annual Finance Conference 16Warwick University, 21-22 March 2012Budget briefing

7 Pensions 18Social Housing Pension SchemeLocal Government Pension SchemesPensions tax changes

8 Treasury 21The Housing Hub

9 Financial inclusion 22My Home Finance

10 Regulation 23The new regulatory framework

11 Risk 25Supply chain management

12 Seminars and conferences 27National eventsRegional finance forums

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1 IntroductionHappy New Year and welcome to the Federation’s winter edition of the Finance Policy Quarterly Update.

In this issue we:

• Assess the current status of welfare reform as it winds its way through the Commons

• Describe the Federation’s work to determine the funding of social housing beyond 2015

• Clarify how housing associations can collaborate and share costs without the headache of VAT

• Advise associations on accounting for the new investment framework, and

• Update you on the latest developments in, and timetable for, the introduction of IFRS-style accounts and the revision of the housing SORP.

In other articles we:

• Explore significant pensions issues for your organisation arising from both SHPS’s latest triennial valuation and LGPS scheme administration, and

• Summarise the key issues in the TSA’s consultation on the new regulatory framework

• Highlight salient features of the TSA’s draft new Accounting Direction.

Ensure your leadership team is up to speed on risks facing the sector by attending our:

• Risk Conference, 1 February 2012, Novotel Birmingham Centre

Keynote speakers:

o David Orr (CEO, National Housing Federation)

o Mathew Bailes (Director of Regulation, TSA), and

o Paul Tennant (CEO, Orbit).

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Section 6 of the Update is a must-read to obtain details of the Federation’s:

• 30th Housing Finance Conference and Exhibition, 21-22 March 2012, Warwick University

Keynote speakers:

o Lord Prescott

o Malcolm Whitehouse (Universal Credit Programme Director, DWP)

o George Buckley (Chief UK Economist, Deutcshe Bank), and

o Former Olympian, Kriss Akabusi.

Finally, we wish to remind you that we continually review the structure and content of the Update and we are always very appreciative of any feedback you provide. Many of you have indicated that the Update would benefit from being more concise. We have responded by reducing the current edition by 25%. However, for particular subjects, for example taxation, we have posted more in-depth articles on the Federation website.

We are mindful that some of you have actually suggested that full-length articles are more useful. Either way, please keep sending your feedback to: [email protected].

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2 Welfare reform

Federation fights on following bedroom tax winThe Welfare Reform Bill is continuing its progress through Parliament. In December, members of the House of Lords voted to amend the Bill to make an exemption to the under-occupation penalty for certain households in social housing who are struggling to downsize. The Federation is seeking to persuade the Government to accept this sensible compromise. The Department for Work and Pensions (DWP) has announced the locations and participants of the demonstration projects to test the end of direct payments to landlords. The DWP has listened to the Federation’s arguments for social landlords to be closely involved in the implementation of the Universal Credit.

Under-occupation bedroom taxThe National Housing Federation is refocusing its lobbying on the House of Commons after members of the House of Lords backed an amendment to the Welfare Reform Bill to reduce the harmful impact of the proposed under-occupation penalty, or bedroom tax, by 258 votes to 190. The amendment, to permit households to ‘under-occupy’ by one bedroom where no alternative property is available into which to downsize, provides more flexibility and better reflects the reality of family life. The vote followed months of intensive lobbying of influential members of Parliament by Federation staff, media stories, blog posts, letters to the press, a grassroots campaign to encourage tenants to write to ministers and key peers, and the Federation’s Welfare Action Week. The Federation described the result as ‘a victory for fairness’ and is now campaigning to ensure the decision is not reversed when the Bill returns to the Commons – most likely in early February. Welfare Reform Minister Lord Freud also promised an extra £30m a year for local authorities to give out in discretionary housing payments where benefit cuts would threaten fostering and the availability of adapted homes.

Overall benefit capWe are mindful of how difficult it will be to stop the Government’s proposed overall cap on household benefits, given how prominently it has been championed by the Chancellor.

Nevertheless, we are hopeful that concessions can be secured. We have promoted amendments in the Lords to exempt from the cap homeless households in temporary accommodation, and to allow all households a 26-week grace period before the cap is imposed. We have also supported attempts to exempt child benefit from the calculation of the cap, as this would reduce its disproportionate impact on children and mitigate the harm to the fight against child poverty.

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Direct paymentsAn amendment to retain tenants’ right to choose to have their benefit paid directly to their landlord under the Universal Credit was debated by the House of Lords at Report Stage following campaigning by the Federation. The amendment, tabled by Lord Best, was backed by a broad coalition of housing organisations, social and private landlords and tenant groups. Although it was not pushed to a vote, the debate was well attended and, in response, Welfare Reform Minister Lord Freud moved to reassure peers that in pressing ahead with ending direct payments to landlords for most working age tenants, protecting vulnerable tenants and the financial stability of the housing sector would remain priorities.

The DWP has announced that the local authority and housing association partnerships named for the direct payment demonstration projects are:

• Southwark Council and Family Mosaic, London

• Oxford City Council and Oxford Citizens, (part of the) Greensquare Group, Southern England

• Shropshire Unitary County Council and Bromford Group, Sanctuary Housing and The Wrekin Housing Society, West Midlands

• Wakefield Metropolitan Borough Council and Wakefield and District Housing, Northern England

• Torfaen Borough County Council and Bron Afon Community Housing and Charter Housing, Wales

Each will be involved in testing out different elements of the project, including testing different trigger points when social landlords should receive direct payments if tenants fall into specified levels of arrears. The projects will also inform how best to communicate the changes to claimants, provide assistance with budgeting to successfully pay their rent, and support claimants and landlords experiencing financial difficulties.

We will work closely with the projects, the independent evaluator and lenders to ensure that they explore both how association income can be secured and the best ways to target support for tenants.

The Federation’s contact for welfare reform is Andy Tate, Neighbourhoods Policy Officer, 020 7067 1081 or [email protected].

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3 Investment

Funding future homesThe Federation has started a key piece of work considering housing associations’ role in funding future homes.

As we face the serious prospect of new households forming at a rate of 232,000 per year to 2033, home ownership falling rapidly as people are priced out of the market, ever increasing social housing waiting lists, and soaring private rented sector rents it is ever-more apparent that we need to create a sustainable model for investment in affordable homes.

We believe there is a window of opportunity to influence how housing is delivered post-2015, and over the coming months will be speaking to a wide range of members and stakeholders. Our intention is to develop a vision for funding future homes that will support the delivery of a range of high quality housing at a scale to meet the needs of local communities, offer excellent value for money to the taxpayer and be financially viable for housing associations to deliver. Our ambition is that our vision will influence the political debate and Government’s thinking on future investment models.

To ensure we are working from a robust evidence base we have recently published an evidence base from our research partners the Cambridge Centre for Housing and Planning Research, alongside a number of discussion questions. This is available from our website www.housing.org.uk. Now we want to hear from you. We have arranged six regional member engagement events around this piece of work on the following dates:

• Birmingham: 24 January 2012

• Bristol: 31 January 2012

• Manchester: 2 February 2012

• York: 3 February 2012

• London: 7 February 2012

• London: 8 February 2012

If you would like to discuss this work further contact Lucy Thornycroft, Investment Leader, on 020 7067 1091 or [email protected] for more information.

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4 Taxation

VATVAT Cost Sharing Exemption legislationThe March Budget 2012 will confirm HM Treasury’s intention to introduce the VAT Cost Sharing Exemption. The exemption, which should be implemented by the summer, will remove the VAT barrier that prevents housing associations from working together to reduce their costs and increase their effectiveness.

HMRC has issued an Information Sheet which includes a questions and answers (Q&A) section on some of the key features of the proposed exemptions. The Q&A section describes the possibility for back-dating the exemption by up to four years from the effective date. To review details of the draft Finance Bill clauses, the Information Sheet on the VAT Cost Sharing Exemption and the Consultation Responses Document click on/follow the link to HMRC’s website: http://www.hmrc.gov.uk/budget-updates/march2011/draft-tax-finance-bill-2012.htm.

HMRC will continue to work with interested parties, including representatives from the housing association sector, to produce detailed regulations confirming how the exemption will operate over the coming months. The regulations are expected to be issued in draft format by May 2012 and the Federation and KPMG, our tax advisers will be hosting a workshop with members to inform the process (details of this will follow and announcements will be made at the Federation’s Finance Conference in March). To access a copy of the Federation’s briefing on the VAT Cost Sharing Exemption, post the December 2011 draft Finance Bill announcement, click on/follow the link:http://www.housing.org.uk/publications/find_a_publication/finance/hmrc_annouce_vat_cse.aspx.

Extra Care policy changeHMRC has issued a Brief notifying that some residential developments that would previously have been subject to VAT at the standard rate could now be zero rated. HMRC continues to distinguish accommodation where the care is of a type typically provided by an ‘institution’. HMRC will be considering its policy where buildings are converted into extra care units and the potential implications for buildings used for other residential purposes (for example, student accommodation) and developed under a C2 consent later this year. Click on/follow the link to access a copy of the Brief: http://www.hmrc.gov.uk/briefs/vat/brief4711.htm.

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Expediting special VAT recovery negotiationsHMRC and the three housing federations have agreed a protocol for escalating progress with partial exemption cases that have reached an impasse. Housing associations only recover a proportion of the VAT that they incur and often negotiate with HMRC a bespoke method of calculating the recoverable amount. The annual VAT incurred by the sector amounts to hundreds of millions of pounds per annum and, historically, agreeing special partial exemption methods have proved irksome and tortuous.

In April 2010, with assistance from the three federations and their tax advisers, HMRC issued a Housing Association Partial Exemption Framework to simplify the process and provide more consistency and certainly for both HMRC and housing associations. Whilst the Framework has greatly assisted in the process, difficulties still arise.

The protocol should only be read in conjunction with the Housing Association Partial Exemption Framework, should be used sparingly and is intended as a last resort. The protocol describes which cases are suitable for escalation. To assess either a copy of the escalation protocol or the Housing Association Partial Exemption Framework, click on/follow the link: http://www.housing.org.uk/policy/finance/tax_policy/vat.aspx.

People’s taxReal time information (RTI)HMRC is introducing RTI for payroll processing. Under RTI you will share information on the tax and national insurance treatment of all payments you make to employees when or before the payment is made to the employee. You will be sharing more information with HMRC than ever before and, if you haven’t had an HMRC PAYE review for a number of years, we recommend that you review your systems and processes in order to identify any payments that are not being treated correctly for tax and NIC purposes. If any errors are reported to HMRC, it is likely to open a review. Revenue lead reviews can be time-consuming, the outcome is uncertain and they can be extremely stressful. Finding any errors before HMRC enables you to make a voluntary disclosure which can allow you to lead the review and significantly reduce any penalties charged.

The payroll taxes session at the Finance Conference in March 2012 will provide a more detailed update on RTI and how our members can prepare for its introduction.

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Tax helpline for Federation membersThe Federation reminds all members that it has a contractual arrangement with KPMG for the provision of tax advice to members. As part of this arrangement, KPMG will provide members with half an hour of free advice on tax issues. This service covers corporation tax, VAT, people’s taxes and stamp duty land tax issues. Details of how members can access this resource are available on the members’ section of our website at:https://www.housing.org.uk/OnlineStore/default.aspx?tabid=64&returnURL=http://www.housing.org.uk/membership/member_benefits-1/entitlements/kpmg_tax_advice.aspx.

You will need to register and log in to use this service.

The Federation’s contact for all taxes is John Butler, Finance Policy Officer, 020 7067 1177 or [email protected].

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5 Accounting

IFRS convergenceIn 2011, the Accounting Standards Board (ASB) consulted on the convergence of UK accounting rules with International Financial Reporting Standards (IFRS). This article summarises the series of changes to the process that the ASB has since announced, and outlines the timetable for the first IFRS-style housing association accounts.

The sector made a robust and well-articulated response to the consultation and 45% of all responses to the initial consultation were submitted by housing associations. Almost as a single voice, housing associations consistently raised seven key concerns. Encouragingly, in our discussions during the interim, the ASB has indicated a willingness to respond positively to the sector’s concerns.

The ASB has decided to combine the contents of the Financial Reporting Standard for Medium-sized Entities with the Financial Reporting Standard for Public Benefit Entities to form a single standard, the Financial Reporting Standard (FRS). Given the extent of technical changes, and with the redrafting required, the ASB decided to issue a revised FRS by the end of January for a further three-month consultation period.

Part of the the Statement of Recommended Practice (SORP) Working Party’s focus in the coming weeks will be to scrutinise the amendments to ensure that the changes made are in the interest of housing associations. Of particular interest will be changes to grant accounting. The ASB has invited the Federation to meet in March 2012 to discuss the sector’s views on the revised standard and it suggests the FRS should be finalised by the end of summer 2012.

In the meantime, the ASB has also decided to postpone implementation of the FRS until 1 January 2015. Part of the reason for this is to allow time for the International Accounting Standards Board (IASB) to finalise international accounting rules relating to financial instruments, so that they can be incorporated into the new UK framework.

One of the sector’s concerns had related to the stringent rules proposed in the previous version of the FRS on financial instruments. The sector had argued that the FRS should include the more business-friendly accounting rules for financial instruments that is currently being deliberated upon by the IASB. However, even the IASB rules contain provisions that may create awkwardness for housing associations.

You may recall that, in preparedness for the FRS and to promote consistency and wider application amongst our members, the Federation had arranged to host a series of roadshows in February 2012. However, given the delay in implementing the FRS and the paramount importance of, and uncertainty over, the accounting rules for financial instruments, the Federation has decided to postpone the roadshows until autumn 2012

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(details to follow). By the autumn, the ASB should have published the FRS and the position regarding the accounting for financial instruments should be more settled.

The autumn events will also be used to road-test much of the housing-specific accounting guidance currently being devised for housing SORP. To recap, the housing SORP is in the process of being completely rewritten for consistency with the IFRS framework. The process includes extensive consultation with the sector and the roadshows will also be used to launch the SORP consultation exercise. In the meantime, the Federation will be running a series of workshops on current accounting developments during our March 2012 Finance Conference – a number of these will be targeted at non-finance specialists.

The FRS provides accounting principles which are not sector-specific. Housing associations will still require detailed guidance in order to interpret these accounting rules for the operating conditions of the sector. The revised housing SORP needs to be in place in time for the scheduled 1 January 2015 switchover.

Accounting for the new investment frameworkThe Homes and Communities Agency (HCA) has now implemented the ‘2011-15 Affordable Homes Framework’ and in doing so has issued guidance on how the grant funding within this framework will work in practice.

One of the key features on how the framework will operate is the timing of grant payments. Grant allocation to individual schemes within the programme vary significantly – some will have nil grant allocated, whilst others will be more grant-hungry. Under the new framework, the HCA will make grant payments to housing associations based on average grant rates per unit calculated over the entire programme.

Consequently, the grant payments made by the HCA will often not match the grant actually allocated to the scheme being developed. Consequently, the difference between the two sums will represent either a creditor or debtor for the association. In addition, the new framework includes grant clawback provisions for units housing associations fail to deliver – the clawbacks are to be calculated on grant allocated to specific schemes. Finally, the new framework is predicated on a proportion of housing association social homes being re-let at higher affordable rents, to cross-subsidise the new framework. How should the cross-subsidy be recognised?

A number of foresighted housing associations have raised enquiries with both the Federation and auditors regarding how grant funding should be accounted for under the new investment framework.

The Federation, working with members of the SORP Working Party, has considered these new accounting complexities and has decided to issue guidance to the sector to assist in accounting for grant funding under the new investment framework. However, in producing this guidance, the Federation emphasises that the principles of the 2010 SORP still remain

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valid and that they do not need to be changed to account for grant funding under the new framework. Merely that there are a number of areas where users of the SORP would benefit from further interpretation of these principles, given the increased complexity of the new grant regime. To access a copy of the guidance, click on or follow this link: http://www.housing.org.uk/policy/finance/accounting.aspx.

Accounting for the new investment programme will be considered at workshops at the March 2012 Finance Conference at Warwick University.

TSA consultation on the new Accounting DirectionThe social housing regulator (TSA) has issued a consultation paper on the new Accounting Direction. The consultation commenced from mid-December 2011 and ends on Tuesday 6 March 2012. The Direction which will replace the current Accounting Determination to take effect for annual accounts relating to the period 1 April 2012-31 March 2013 – earlier adoption will be permitted. To access the consultation document click on/follow the link:http://www.tenantservicesauthority.org/server/show/ConWebDoc.21659.

The key changes are:

• A requirement for those providers who undertake non-regulated activity or are controlled by a non-regulated entity to report the results of their social housing activities by way of segmental reporting in the notes to the accounts. This will allow disclosure and compari-son by for-profit housing associations and non-profit housing associations on a similar basis. Disclosure will be subject to materiality considerations.

• A focus on the transparency of transactions between regulated and non-regulated elements, covering the apportionment and allocation of costs, the distribution of profits and the volume and nature of transactions.

• Enhanced remuneration disclosures which will increase requirements for openness. This will mean more detail on senior staff remuneration, including pension contributions and payments upon termination of contract, plus details (where available) of those pension deficits which are currently not disclosed under Financial Reporting Standard 17. The additional disclosures focus on the chief executive, senior management team and higher paid staff.

• Updating revised standards to include reference to the statement of compliance with the requirements of the value for money standard and code of governance in use.

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• A reduction in areas where detail has been prescribed in the past (whilst still aiming for consistency across housing associations). The TSA will no longer specify detailed income and expenditure nor balance sheet layouts. It proposes to consolidate much of the detail currently required about different types of social housing, and

• General updates to reflect accounting and legislative changes.

The Federation is grateful to Philip Rego, a partner in BDO LLP, for providing preliminary views on the TSA’s draft Accounting Direction. The comments which, can be accessed by clicking on the link below, are some of the issues housing associations may wish to consider when responding to the consultation. To access a copy of the guidance click on or follow this link: http://www.housing.org.uk/policy/finance/accounting.aspx.

The Federation’s contact for Treasury is Joseph Carr, Finance Policy Leader, 020 7067 1094 or [email protected].

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6 The Federation’s 30th annual Finance Conference

Warwick University, 21-22 March 2012UK Olympic year 2012 also marks the Federation’s 30th annual Finance Conference, the blue riband event for social housing finance professionals. The event offers cutting edge keynote speakers, over 30 breakout sessions, an unrivalled choice of exhibitors covering a full range of relevant products and, of course, the Finance Conference disco.

The sector faces the most difficult financial operating environment for decades. As these issues affect organisations’ viability, it is important they are not delegated solely to finance. Leadership teams need the confidence and understanding of these issues to demand coherent financial information and participate fully with finance directors in taking these key strategic decisions. In response to this, for the first time in a finance setting, we have included breakout sessions suitable for non-finance leaders – replicating the workplace environment.

Key sessions include:

• Pulling no punches – to Hull and back, Lord Prescott, Former Deputy Prime Minister during the Blair years. We are sure Lord Prescott will punch above his weight!

• The future of lending: George Buckley, Chief UK Economist, Deutsche Bank

• Welfare reform and housing: Malcolm Whitehouse, the Universal Credit Programme Director at the Department offor Work and Pensions, and

• Going for Gold – running successful business, Kriss Akabusi, multi-medal winning 400 metre runner and hurdler.

Breakout sessions include:

• Welfare reform

• Pensions auto-enrolment

• On treasury – future financing, REITs, sale and lease backs, loan re-pricing, etc.

• On accounting – review of the ASB’s latest draft of the FRS, accounting for the new investment frame work and the TSA’s Accounting Direction

• The VAT Cost Sharing Exemption, and much more.

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Budget briefingThe Budget will be announced on the Wednesday of the conference, 21 March 2012, and television screens will be set up throughout the exhibition area so that you will not miss a single word of the Chancellor’s speech.

We are also pleased to announce that, for the second year running, KPMG will be hosting the very popular Budget Breakfast Briefing on the Thursday morning. The Briefing will be used to highlight and explain the announcements made in the Budget that affect housing associations. The Briefing is free and we anticipate that it will prove very popular. Therefore, we will reserve places on a first-come, first-serve basis. To avoid disappointment, we advise delegates keen to secure a place at the Budget Breakfast to click on this link to pre-book a place: [email protected].

However, should we be vastly over-subscribed, we may need to ration the number of places allocated to individual organisations.

The Federation’s contact is Joseph Carr, Finance Policy Leader, 020 7067 1094 or [email protected].

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7 Pensions

Social Housing Pension SchemeLast autumn the Social Housing Pension Scheme (SHPS) hosted nine employer forums around England and Wales to explain progress on the triennial valuation, the employer financial assessment and the current consultation on the benefit structure of the scheme. Investment themes and auto-enrolment were also covered. Consultation on the benefit structure commenced in September 2011 and ends on 31 January 2012.

SHPS valuation and benefits reviewOn 30 September 2011, SHPS carried out a triennial scheme valuation. SHPS’s 2008 valuation revealed a deficit of £663m and a recovery plan was put in place over 15 years from the valuation date. However, there have been significant changes in the world economy and, in the main these factors have affected pension scheme funding since 2008. In particular, interest rates have fallen significantly and this has had the effect of increasing liabilities as actuaries expect a lower return in the future on scheme assets.

Taking into account actual investment returns since the last valuation and these other factors, an increase in the deficit must be expected, and additional deficit contributions needed are likely to be allocated according to each employer’s share of the liabilities of the scheme. It is expected that the results of the valuation will made public in May 2012.

Financial assessment of employersIn October 2011 SHPS issued financial assessment questionnaires to all its employers who have active members in a defined benefit structure, for completion and return by email by 30 November 2011. Employers found to be ‘higher risk’ in pension liability terms can be asked to change their benefit structure for all future service to a lower risk one, probably defined contribution. This will prevent the build up of further liabilities which, in extremis, they might not be able to meet. The position of past service deficits and liability will not be changed.

For a fuller report on issues raised above click on/follow the link below:http://www.housing.org.uk/policy/finance/pensions/social_housing_pension_scheme.aspx.

Local Government Pension SchemesAs part of the Government’s spending review, a target has been set to reduce pension costs in the unfunded public sector by £2.8bn a year by 2014/15. As part of this, the Local Government Pension Scheme (LGPS) needs to be saving £900m a year by this date. This is proposed to be achieved in three ways – increasing employee contributions, reducing future benefit accrual and increasing the normal retirement age.

The Department of Communities and Local Government (DCLG) has set out proposals that, if implemented, will lead to changes coming into effect from April this year. Although DCLG

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is consulting widely on its proposals, the views of a significant number of participating employers, including housing associations, have not been sought.

Nonetheless, the Federation has responded to the consultation and requested that we are consulted on any proposed changes in the future. In addition, our response highlighted the inconsistent and unfair treatment of housing associations by individual LGPS’s around the country and made recommendations to improve the conditions for housing associations.

Fairer treatment for housing associations in LGPSsThe Federation recently met with DCLG to discuss the claims by a number of housing associations about unfair treatment from local government pension schemes around the country. Individual associations have little influence in the way these schemes are run, and often they are not consulted on changes made by the LGPS that affect them, despite housing associations owning 2-4% of LGPS assets. Some of the issues could affect the financial health of housing associations. DCLG was very interested to learn about specific instances we raised, the prevalence of such instances and representation of housing associations on LGPS.

The Federation is devising a new strategy around LGPS to help safeguard the position of our members. However, in order to devise this strategy we are in need of information about the prevalence of LGPSs in the sector and for this we need your help. The information we require includes:

• The absolute and relative size of your association’s assets compared to the LGPS total

• The absolute and relative size of your association’s liabilities compared to the LGPS total

• The absolute and relative size of your association’s contributions compared to the LGPS total

• Number of employees on LGPS and relative number of employees compared to the LGPS total, and

• Information on differiential treatment your association has faced relative to fellow local authority participants of the your scheme (eg, assumptions used, repayment periods, increased contributions, requirement to purchase a bond).

Any information you are able to provide will be treated in the strictest of confidence and will be used in our lobbying of DCLG and LGPSs. Please email any information you are able to provide to [email protected] as soon as possible, but no later than Friday 24 February 2012.

Thank you in advance for your help in this important area.

To access a copy of our consultation response and a more in-depth review of this article, click on or follow these links: http://www.housing.org.uk/policy/finance/pensions.aspx;http://www.housing.org.uk/policy/finance/pensions/local_government_pension_schem.aspx.

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Pensions tax changesCountdown to the Fixed Protection pensions deadline: 5 April 2012Benefits under registered pension schemes are tested against the Lifetime Allowance (LTA) at retirement. If the benefit exceeds the LTA, then there is a 55% tax charge on the excess. On 6 April 2012 the LTA reduces from £1.8m to £1.5m and, broadly, if you earn over £100,000 a year and have been in a pension scheme for more than 30 years then you could well be affected.

There is, however, a way in which the current £1.8m limit can be maintained – by applying to HMRC for ‘Fixed Protection’. Fixed Protection, however, comes with the following conditions:

• Must be registered for Fixed Protection by the 5 April 2012 deadline

• Must NOT accrue any further benefits in a registered pension scheme after 5 April 2012

• Must NOT join a registered pension scheme after 5 April 2012

• Must NOT have either Primary or Enhanced protection.

If you or your senior colleagues might be affected, we suggest that you arrange to have your pension provision assessed against the LTA and consider the relative merits of putting in place Fixed Protection versus the loss of any future benefit accrual and other benefits.

One issue connected to this is the possibility of inadvertently losing this protection on auto enrolment. This will be discussed in our next Finance Policy Update.

The Federation’s contact for pensions is John Butler, Finance Policy Officer, 020 7067 1177 or [email protected]. Stephen Duckworth is the Federation’s representative on the SHPS Pensions Committee.

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8 Treasury

The Housing HubIntroductionThe Building Societies Association (BSA) and its members see both shared ownership and equity loans as key housing options going forward, particularly for first-time buyers, where the ability to raise a substantial deposit is difficult. BSA members are long time supporters of affordable housing schemes and many seek to increase lending on such schemes.

One of the key aspects to increasing lending into these schemes is the sharing of information on lending criteria and housing developments between lenders and housing associations. The BSA has sought to address this issue by developing ‘The Housing Hub’.

What is The Housing Hub and how does it work?The Housing Hub is a dedicated website for lenders and housing associations that operate shared ownership and equity loan schemes in England, Scotland and Wales. Housing associations and lenders willing to lend on such properties can exchange information. Lenders publish their lending criteria for shared ownership and equity loan schemes on the Hub. Providers of shared ownership and equity loan schemes publish details of their current and future developments on the Hub. The search facility allows lenders to find developments they could provide lending for and allows providers to find potential lenders for their customers.

Information provisionThe Hub also contains information on the various shared ownership and equity loan schemes in operation in England, Wales and Scotland. The Hub currently contains information for lenders and providers only on shared ownership in England, including standard lease agreements and guidance notes. The aim is to expand this aspect of The Hub over the coming months, with the potential to add information for conveyancers and brokers.

What’s next?The Housing Hub launched at the end of October 2011 and is already being used by a number of housing associations and lenders. The BSA has invited all housing associations to participate and to share details of their developments.

The Housing Hub can be found at www.thehousinghub.co.uk.

The Federation’s contact for low cost home ownership is Adam Morton, Investment Policy Officer, 020 7067 1077 or [email protected].

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9 Financial inclusion

My Home FinanceIntroductionMy Home Finance Limited (MHF) was established in August 2010 by the National Housing Federation. The company serves financially excluded individuals – people who cannot access credit from mainstream sources. Historically, this group has been constrained to borrowing from doorstep, payday and illegal lenders who charge interest rates of between 200% and 4,000%.

Operational managementAt the time of its launch, MHF sub-contracted East Lancs Moneyline, an experienced social lender, to run its facilities and lending activities. However, as of January 2012, MHF transferred its operational management in-house.

Back office servicesMHF’s back office services (calling of direct debits, monetary reconciliation etc.), are now being handled by Street UK. This Birmingham-based organisation already provides the software used for MHF’s credit portfolio. For the time being MHF will be looking to consolidate its West Midlands activities, before rolling out into other regions.

At 31 December 2011, MHF had made over 7,500 loans, with 46% of customers opening savings accounts.

The Federation’s contact is Tess Pendle, Head of My Home Finance, 020 7067 1043 or [email protected].

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10 Regulation

The new regulatory frameworkIntroductionThe TSA has launched its formal consultation on the new regulatory framework. The consultation runs until 10 February 2012. The draft framework incorporates some significant changes to take account of the new investment framework, ministerial directions to the regulator, and provisions in the Localism Act 2011 that amend the regulator’s powers. It is planned that the new framework will come into effect on 1 April 2012 to coincide with the abolition of the TSA and the transfer of its regulatory function to a special committee of the HCA. The consultation consists of three documents. The main consultation paper contains the proposed framework itself, together with explanatory material, a separate document contains details on the rent standard and another paper sets out proposed guidance on how the regulator will use its powers.

Overview of changes• The standards are divided into ‘economic standards’ and ‘consumer standards’. In

respect of the consumer standards, the regulator’s enforcement powers will be available only if it thinks there is a risk of ‘serious detriment’.

• The ‘value for money’ standard is moved into the ‘economic’ category and is much amplified. Boards of registered providers will be expected to carry out annually a ‘robust self-assessment’ of how their organisation is achieving value for money, to include consideration of a range of options for improving their organisation’s efficiency and making better use of its asset base. Examples include the contracting out of services, mergers, greater specialisation, and economies of scale. In our view this represents potentially an excessive degree of regulatory interference in matters of value for money that are properly the concern of boards.

• The economic standards include a separate standard for rent (which was formerly covered by the tenure standard). The rent standard maintains the existing rent formula but also incorporates provisions relating to the affordable rent regime.

• The tenant involvement standard places new emphasis on local mechanisms to engage residents, scrutinise performance, and resolve problems. It also includes the controversial requirement to give residents the opportunity to be involved in commissioning and undertaking repairs, and receiving a share of any financial savings. On the latter proposal, we are questioning the appropriateness of such detailed regulation.

• The tenure standard provides the option of using tenancies with a fixed term of at least five years (or, in exceptional circumstances, two years) as an alternative to the traditional use of periodic ‘lifetime’ tenancies. As expected, the use of fixed-term tenancies is delinked from rent levels, so the option will be available for re-lets at social rents.

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• The TSA sets out its approach to ‘serious detriment’. This will focus on the degree of harm, or potential harm, that may be caused to tenants by a breach of a consumer standard.

• The regulator will no longer have a role in dealing with individual complaints against landlords.

The rent standard guidance confirms the Government’s and regulator’s intention to maintain the current rent setting formula. The guidance is explicit that the formula for rent increases remains based on the Retail Prices Index (RPI) and is still RPI+0.5% based on each September’s RPI figure. The RPI stood at 5.6% in September 2011. The guidance also reiterates that affordable rent homes can have their rent increased by a ceiling of RPI+0.5%, and that rents should be rebased at the expiry or termination of the tenancy to leave them at maximum of 80% of market rent.

The Federation’s contact for regulation is John Bryant, Regulation Policy Leader, 020 7067 1082 or [email protected].

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11 Risk

Supply chain managementSupply chain management can be perceived as being solely about the day-to-day procurement or monitoring of operational contracts, or about picking up the pieces and coping when a major supplier or partner ceases to operate. When referring to their ‘supply chain’, many housing associations still often refer to traditional performance indicators held in a long spreadsheet of suppliers, rather than truly understanding who they rely and depend on to deliver with or on their behalf.

The reality from a strategic perspective is that the challenges of managing an increasingly complex network of suppliers and partners can threaten organisational and business resilience and create new challenges for your overall approach to risk management. This will likely also include those key strategic reliances which are not necessarily governed and managed through a contractual arrangement.

Effective supply chain management is about:

• Understanding who your key suppliers/providers are from a ‘strategic’ perspective

• Developing linkage of key suppliers/providers with ‘value proposition’ and organisational priorities rather than just ‘spend’

• Ensuring different functions and business areas join and recognise risks managed in different organisations

• Analysing critical supply chains to understand level of complexity and resilience.

Strategically and coherently managing your overall supply chain can help by ensuring fewer surprises, fostering closer cross-function understanding, positioning the organisation to take advantage of opportunities, enabling proactive rather than reactive responses to incidents, and providing benchmark information for evaluating improvements and risk insights into specific aspects of the supply chain.

Fundamentally, understanding the supply chain risks your housing association faces will help ensure a more resilient organisation that is better able to anticipate surprises, recover from disruptions, adapt to changing conditions and leverage strategic advantages for consistent delivery of objectives, corporate sustainability and financial strength.

Joseph White, Senior Risk Consultant from Zurich Municipal will be expanding on this topic in a session at the upcoming Risk Management Conference in Birmingham on 1 February 2012.

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Click on/follow the link to take a brief supply chain self-assessment to see how you might benefit from better developing your approach in this area: http://www.housing.org.uk/policy/finance/risk.aspx.

The Federation’s contact for pensions is John Butler, Finance Policy Officer, 020 7067 1177 or [email protected].

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12 Seminars and conferencesNational events• RISK MANAGEMENT CONFERENCE Novotel Birmingham Centre, Wednesday 1 February 2012 The Federation contact is John Butler, Finance Policy Officer: [email protected]

• THE 30TH ANNUAL FINANCE CONFERENCE 2012 Wednesday 21-Thursday 22 March 2012 The Federation contact is Joseph Carr, Finance Policy Leader: [email protected]

Regional finance forums• NORTH WEST FINANCE FORUM Thursday 26 January 2012 – Details to follow For further details contact Jacqui Fieldhouse on: [email protected]

• EAST OF ENGLAND FINANCE FORUM Monday 27 February 2012 – Details to follow For further details please contact Anna Simpson on: [email protected]

• NORTH EAST FINANCE FORUM Wednesday 7 March 2012 – Details to follow For further details, contact Andrew Malcolm on: [email protected]

• LONDON FINANCE GROUP Thursday 8 March 2012 – Details to follow For further details, contact Phil Newsam on: [email protected]

• EAST MIDLANDS FINANCE FORUM Tuesday 13 March 2012 – Details to follow For further details, contact Rob Griffiths on: [email protected]

• NORTH WEST FINANCE FORUM Thursday 26 April 2012 – Details to follow For further details, contact Jacqui Fieldhouse on: [email protected]

Finance policy quarterly updateProvides an update on:

• The current status of welfare reform

• Funding future homes 2015 and beyond

• Cost sharing exemption following the announcement on its implementation

• How to account for the new investment framework

• Pensions, risk and regulation

and more . . .

If you would like to be added or removed from the mailing list for this publication and other policy updates on our database please contact [email protected].

The National Housing Federation is the voice of affordable housing in England. We believe that everyone should have the home they need at a price they can afford. That’s why we represent the work of housing associations and campaign for better housing.

Our members provide two and a half million homes for more than five million people. And each year they invest in a diverse range of neighbourhood projects that help create strong, vibrant communities.

National Housing Federation 25 Procter Street, London WC1V 6NY Tel: 0207 067 1010 Email: [email protected] www.housing.org.uk

Contact: Joseph Carr Email: [email protected] Tel: 020 7067 1094

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