Help TFN investigate the pension problem


Susan Smith explains why TFN is investigating third sector pensions and what you can do to help

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2nd August 2017 by Susan Smith 1 Comment

Scottish charities are struggling under the pressure of pension debt, we know this much. But how much is a bit of a mystery.

Since new 2015 regulations that mean charities have to declare their pension deficits in their annual reports, concerns have been escalating across the sector about pension deficits. We’ve heard rumours of organisations having to fold because of their pension debt, of mergers failing and of grants and bank loans being turned down.

However, TFN is struggling to find real evidence that any of this is actually happening and nobody has so far been willing to discuss it with TFN reporters. 

The full extent of any charity’s pension debt is a fearful figure indeed. The Scottish Council for Voluntary Organisations (SCVO), for example, declared a £4 million pension liability in 2016, up almost £1m on 2015. This was against an annual income of just £13m.

In reality though SCVO has around 20 years to pay off this debt, so it's similar to your family mortgage - as long it can make its repayments, the size of the deficit shouldn’t impact much on its day to day running.

However, according to the rumours we’re hearing at TFN, funders and other stakeholders aren’t seeing it this way. It seems those working with the sector are running scared, and this, more than the deficit itself, could prove fatal.

The ongoing problem is that things look set to get worse. While bond yields, which globally tend of follow interest rates, remain low, pension deficits will continue to grow. This means the amount of money that charities have to pay into them will continue to grow, as SCVO has found.

So, even if a charity is managing its repayments now, it’s a legitimate fear that it might not be able to in the future.  

Scotland’s third sector is involved in a number of different pension schemes from the Pension’s Trust Scottish Voluntary Sector Pension Scheme to local government final salary pension schemes. A number of Scottish charities are currently trying to reduce their debt in the Scottish Third Sector Pension scheme by buying out members. This will hopefully help to reduce the debt for all the charities involved.

Other charities though are not so fortunate. Some are trapped into local government schemes and their debt just keeps getting bigger and bigger, others can’t afford to buy out members.

Pension deficit problems are not unique to the charity sector. It is a major problem for the public sector, and the private sector, most recently the University Superannuation Scheme hit the headlines because of its startling deficit. However, should charities really be left to fold as a result? Is there more that government and the pension schemes could be doing to help charities out – such as allowing them to buy out of local government schemes?

TFN wants to get to the bottom of this issue. So, we’re asking you to tell us what problems and challenges you are currently facing.

If you are a third sector manager or trustee and interested in helping visit and click on TFN Pension Investigation to fill in our short survey (responses are confidential unless you state otherwise).

Susan Smith is editor of Third Force News.

7th August 2017 by Patricia Illsley

I have tried on a number of occasions to complete the pensions survey mentioned here but have not been able to access it.