Charities urged to better explain pension deficits

The Charity Commission has urged charities to use their Trustees’ Annual Report (TAR) to explain how they are tackling the potentially serious risk of a pension scheme deficit.

The message, issued in May, follows a commission review of the accounts of charities whose pension schemes are in deficit. It identified 740 charities with an income of over £500,000 whose accounts showed a deficit and randomly selected 97 of these for scrutiny.

The review found that only 31 of the 97 TARs included an explanation of the financial implications of the charity’s pension scheme deficit and of the trustees’ plans for tackling the issue.  

Commission chief executive Sam Younger said: “Pension deficits can pose a potentially serious risk for charities. This report demonstrates that some charities do not adequately explain how they are dealing with their pension deficit in their Trustees’ Annual Report, thereby missing out on an opportunity to demonstrate to their donors and beneficiaries that they are tackling the problem appropriately.”

Other key findings included:

  • the 97 charities selected reported a total pension scheme deficit of more than £617 million, more than half of which related to just three charities
  • seven charities had deficits that amounted to more than their unrestricted funds and more than 20% of their annual income.

The commission acknowledged that some trustees whose charity’s pension scheme deficit was relatively small may have decided the financial risk was minimal and did not merit inclusion in the TAR.

Nicklin can provide comprehensive advice to charities on all aspects of their finances and our team includes pensions specialists who can assist charities on issues including tackling deficits and implementing pensions auto-enrolment. For more information, please contact us.

Posted in Charity News.