Pension deficits among the largest charities are worth “over a fifth” of their unrestricted reserves on average, a new study has shown.
Hymans Robertson, which published the report, analysed the data of the largest 40 charities in England and Wales.
It found that the chosen charities had a combined £30 billion of reserves, but faced more than £9 billion of defined benefit pension liabilities.
Just one in five (18 per cent) of the charities have a pension surplus.
However, many have already initiated action to plug the gap in their ‘pensions black hole’. The report found that 58 per cent of the charities studied have closed their schemes to future accrual, while the average charity pays three per cent of net income into its pension scheme each year.
Alistair Russell-Smith, of Hymans Robertson, said: “High profile pension scheme failures in recent years, such as BHS and Carillion, are leading to increased regulatory pressure to fund DB schemes whilst the employer has the capacity to do so.
“This is coming through in the ‘2018 Annual Funding Statement’ from the Pensions Regulator, which is a precursor to an update to the code of practice on DB funding. In addition, the Regulator has announced further scrutiny on schemes with assets of under £80m.
“There is a new requirement for these schemes to provide additional disclosures with the next triennial valuation submission. This is due to concerns around governance and conflicts of interest in some smaller schemes.”
Mr Russell-Smith suggests charities in pension distress should appoint a specialist ‘pension trustee’ and make use of the new “deferred debt” arrangement.