Defined benefit pensions issues for charities
Produced in partnership with Gordons LLP and Ruth Bamforth of Walker Morris
Defined benefit pensions issues for charities

The following Pensions practice note Produced in partnership with Gordons LLP and Ruth Bamforth of Walker Morris provides comprehensive and up to date legal information covering:

  • Defined benefit pensions issues for charities
  • Funding
  • Scheme closure
  • Employer debt
  • Cross-subsidy issues
  • Section 75 debt easements
  • The two restructuring easements
  • Deferred debt arrangements
  • Pension Protection Fund
  • PPF entry issues
  • More...

The charities sector in the UK is significant in size. There is a wide range of pension provision across the sector. Many charities are facing financial pressures as a result of a combination of factors including:

  1. increased running costs

  2. decrease in the amount of giving

  3. grant-making bodies having less money to distribute, and

  4. investment underperformance

In the 2017 ‘Navigating the charity pensions maze’, the Charity Finance Group noted that while defined contribution pension schemes were increasingly becoming the norm for current charity employees (often as a result of automatic enrolment), many charities still have to deal with their legacy defined benefit (DB) pension schemes.

This Practice Note looks at the issues for charities with occupational DB pension schemes. The Practice Note does not consider public sector pensions issues.

Funding

The Pensions Act 2004 (PeA 2004) introduced the ‘scheme-specific’ funding regime for DB pension schemes. Broadly speaking, scheme-specific funding requires each scheme to have sufficient and appropriate assets to meet its ‘technical provisions’. The scheme’s trustees are required to conduct an actuarial valuation at least every three years to ascertain whether or not this funding objective has been met. Where there is a funding deficit, the trustees must put a recovery plan in place in order to meet the funding shortfall. A key aspect of the funding negotiations is the strength of the employer’s covenant and the affordability of

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