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Many charities don’t realise how bad their pension problems really are

A few recent stories highlight the impact of the wider pensions crisis on the charity sector.

The combined pensions deficit of the 20 largest charities is around £720m, according to a study by Alexander Forbes.

And
last week, two pensions specialists who advised charities in the
Scottish Voluntary Sector Pensions Scheme – a multi-employer scheme for
small charities – came out and said they believe the scheme presents a danger to many of the charities involved.

A
year ago, an expert predicted to me that at least one major charity
would go under because of its pensions deficit – and it’s certainly
true that there are some out there with major deficits to worry about.

But
in truth, it’s likely to be the smaller organisations, such as those in
the Pensions Trust scheme, that really suffer. They can’t access good
professional advice, they can’t use their reserves to ride out
financial volatility and they haven’t got the in-house expertise to
know if they’ve made the right decisions. Many have signed up for
schemes on the advice of partner or parent organisations that will
prove wholly unsuitable.

The key question is how many other
charities up and down the country are enrolled in local authority and
other multi-employer schemes that are totally unsuitable for them, and
as a result have deep problems that they are totally unaware of.
Probably a lot.

Many of the charities in the Scottish scheme were not aware of the pensions problem they had on their doorstep, according to this blog by David Davison, a pensions consultants who has advised several of them, and this seems to be a common problem.

Many
small charities discover too late – often when merging or shutting down
– that a six or seven-figure debt, larger than their annual income, is
to fall due any moment.

It’s a particularly serious problem for
the trustees of unincorporated charities. They are personally liable
for the debts of their charity.

And, like this trustee, they can find themselves owing an awful lot of cash.

  • Duncan Anderson

    It might be difficult, but it isn’t impossible. As as Board member you have a legal responcibility to discharge to duties to the best of your ability and you must make decisions with regards to the whole organisation and not to one particular member. And if your friend doesn’t understand that, you have to question their friendship.

  • Lee Willows

    Being friends with staff while you’re a board member can be difficult, as is being friends with staff when you are their manager or part of an organisations SMT. Such isolation is a fact of life if you put yourself forward for such roles I think. Having good external friends – especially ones whom work in the same sector has been one coping strategy for me over the years. Additionally as Chief Executive of Trailblazers (www.trailblazersmentoring.org.uk) my relationship with our Chairman is absolutely key in ‘picking me up’ when things do not quite go to plan. Similarly I ‘pick up’ our Chairman and other board members to keep everybody invigorated no matter what is thrown at us.

    Leon also makes a very good comment around time management – again this is a fact of life if you put yourself forward as a trustee, but a regular and ongoing dialogue between the Chair and CEO is important to help you get the balance right.

    You are unique in putting yourself forward Leon as a trustee of TWO charities, while studying and all this at your age. I think your drive and commitment is outstanding and I would say keep charging as you are a future leader within our sector and will inspire others.