- This story has been corrected: please see final paragraph.
The Barnardo Staff Pension Scheme was closed to new members in 2007, but continued to allow existing employees in the scheme to make pension payments. This will cease from the end of March, the charity has said.
It will continue to offer a defined-contribution scheme, which pays money towards employees’ pensions but, unlike a defined-benefit scheme, does not guarantee the level of retirement benefits they will receive.
The charity has pension liabilities of about £548m and a shortfall of £83.9m, according to its most recent accounts. Its income in the year to March 2012 was £245.2m.
Kevin Barnes, director of finance at Barnardo’s, said the charity had paid an average of £11m a year over the past three years towards its defined-benefit pension scheme, which was about 4.5 per cent of its total annual income.
"The decision to close this scheme was to do with the size of the liability and the risk of this increasing further," he said. "We decided we needed to contain the level of liabilities as best we can. We had budgeted for the current level and could continue to pay it, but we couldn’t increase it.
"There was also a secondary point, which is that the members of the scheme are a diminishing part of the workforce, and we were paying a disproportionate amount for their benefits compared with the rest."
The scheme has about 1,600 active members in the scheme, about a fifth of its workforce, and about another 3,500 retired members.
Barnes said the charity would continue to make contributions at the current level "for many years", until the scheme was no longer in deficit.
The majority of large charities face big shortfalls in their defined-benefit schemes, because most were set up with optimistic predictions of how the stock market would perform, and did not sufficiently take into account the effect of increasing life expectancy.
Most have closed their schemes to new members, and others have closed their schemes to future contributions from existing members. In 2009, the NSPCC took similar steps to close its pension scheme to future accruals.
- The changes to the pension scheme have not yet been decided. They are a proposal, as Barnardo's press notice stated. They are also subject to a consultation with staff, which was not mentioned in the press notice. Barnardo's says it informed staff about the consultation on January 10.