Private pension providers 'won't bother with charities'

Pensions specialist Ian Bird warns Third Sector conference that new rules from next year will make charities less attractive to pension companies

Ian Bird
Ian Bird

Private pension providers will not be interested in providing services to many charities once new pension rules are introduced because it will not make commercial sense, delegates at a Third Sector conference heard this week.

Ian Bird, a senior partner at the financial advisers Foster Denovo, told the Third Sector Finance Forum that pension providers would not see charities as "worth the bother" after the introduction of new rules in 2012 that will make it compulsory for all employees to be enrolled in pension schemes.

The new rules will also introduce a universal scheme, the National Employment Savings Trust, to which employers can sign up. But it will not be good value for charities, Bird said.

"Pension providers will have lower margins once they have to deal with Nest," he explained. "Already we're seeing providers taking a more commercial view about who they're willing to work with, because it's expensive to set up a pension scheme.

"After the introduction of Nest, many charities simply won't be worth the bother for private providers. If you are small, with low-paid employees and a high staff turnover, you're not attractive to pension companies."

He said even charities with existing pension schemes might find they cannot enrol new employees.

"It will be a lot of work upgrading a scheme to be compliant with the new rules," Bird said. "If a charity has a 10-year-old scheme with a handful of employees in it, the pension provider might say it's not worth its while to upgrade."

He said that the new rules would be phased in over several years, meaning they would not apply to most charities for some time. But he said it was important they took early action or they might find themselves forced to use Nest.

"You should avoid that if possible," he said. "Nest isn't a very good scheme. You can't transfer money in or out, you can't get professional advice and it's expensive."

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