Alarm sounds for charities in Local Government Pension Scheme

1,700 sector members of public sector funds 'will owe an additional £25m'

The pension costs of charity members of the Local Government Pension Scheme could rise by about £25m in the next year as a result of a valuation carried out at the end of last month, pension consultants have warned.

It is estimated that there are 1,700 third sector members of the scheme, some of them housing associations. Charity members with more than 10,000 staff are already paying an average of 20 per cent of their staff wage costs in pension contributions.

Tony Barnard, an account director at pensions administrator Capita Hartshead, told Third Sector: "When the results of the valuation are released in September, we believe charities will see a minimum increase of 10 per cent, and probably 15 per cent.

"The problem is that charities have no power to influence contributions, and at the same time it is almost impossible to get out of the scheme."

John Prior, head of public sector outsourcing at financial management firm Punter Southall, said many third sector members of the LGPS were small organisations that had joined the scheme when they took on local authority staff as part of contracts.

He said that a rise in contributions would be difficult for many to cope with, but a bigger concern was the cessation valuation, triggered when a charity shuts down or the last employee in the scheme leaves.

He said most charities had not paid enough money into the scheme to cover their liabilities. "Once the charity is no longer a member, it will often be asked to make up its share of that shortfall immediately," he said.

Ashfield Women's Centre in Nottingham, for example, received a £129,000 bill from the LGPS after it shut down when its funding was withdrawn.

Dee Kyte, former finance manager of the centre, said: "Of course, we didn't have it. We were a limited company, so they agreed to take everything we had left. But if we had been an unincorporated organisation, the trustees could have been liable for the whole bill."

The Local Government Association said the Communities and Local Government department regulated the LGPS and was aware of the potential problems for charities.

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