CFG launches Pension Maze and Pensions Manifesto
The Charity Finance Group has just launched its updated guide to the pension issues facing charities and it is well worth a read. The CFG, which promotes best practice in finance management in the
The Charity Finance Group has just launched its updated guide to the pension issues facing charities and it is well worth a read. The CFG, which promotes best practice in finance management in the voluntary sector, has identified pensions, particularly final salary pensions, as "the elephant in the room" and as an issue which could explode and undermine the sector's ability to raise funds. As the CFG comments, the problems are growing in size and complexity, but few are equipped to face them due to the enormity of the challenges. The guide reviews existing issues and trends and includes case studies showing how individual schemes have addressed some of the challenges.
Of particular interest are the comments on multi-employer schemes which include a large number of unconnected employers. The mix of employers of all types and sizes and the difficulty in leaving the schemes risks charities being trapped in them and being faced with rising contributions over which they have a lack of control as stronger employers effectively subsidise weaker ones. The case study of an employer escaping a multi-employer scheme by setting up its own stand alone scheme and taking a bulk transfer of the liabilities relating to its current and former employees is particularly apposite. It is a solution I have long advocated. But the window of opportunity for adopting it may be closing. The solution risks the multi-employer schemes being left with just the weaker employers who can least afford the contributions. As the schemes' trustees come to understand the solvency risk this poses, there will come a time when they may only agree to bulk transfers on unattractive terms.
The CFG has also published a Pension Manifesto setting out the issues it wishes parties to address in the run up to the General Election and beyond. This includes giving more powers to employers in multi-employer schemes to influence funding issues and to close their sections without triggering the statutory additional contribution obligation (the section 75 debt). The CFG also advocates greater transparency in the pension risk being passed to charities that contract with local authorities and join the Local Government Pension Scheme. The CFG suggests segmenting LGPS liabilities so that charities are not at risk for the pension cost of benefits relating to any period before they employ former local authority employees.
The Pension Maze and Pension Manifesto are required reading for anyone interested in the pension challenges facing the charities sector.
Of particular interest are the comments on multi-employer schemes which include a large number of unconnected employers. The mix of employers of all types and sizes and the difficulty in leaving the schemes risks charities being trapped in them and being faced with rising contributions over which they have a lack of control as stronger employers effectively subsidise weaker ones. The case study of an employer escaping a multi-employer scheme by setting up its own stand alone scheme and taking a bulk transfer of the liabilities relating to its current and former employees is particularly apposite. It is a solution I have long advocated. But the window of opportunity for adopting it may be closing. The solution risks the multi-employer schemes being left with just the weaker employers who can least afford the contributions. As the schemes' trustees come to understand the solvency risk this poses, there will come a time when they may only agree to bulk transfers on unattractive terms.
The CFG has also published a Pension Manifesto setting out the issues it wishes parties to address in the run up to the General Election and beyond. This includes giving more powers to employers in multi-employer schemes to influence funding issues and to close their sections without triggering the statutory additional contribution obligation (the section 75 debt). The CFG also advocates greater transparency in the pension risk being passed to charities that contract with local authorities and join the Local Government Pension Scheme. The CFG suggests segmenting LGPS liabilities so that charities are not at risk for the pension cost of benefits relating to any period before they employ former local authority employees.
The Pension Maze and Pension Manifesto are required reading for anyone interested in the pension challenges facing the charities sector.