Change pension rules, Charity Finance Group urges the Chancellor

Pre-Budget submission to George Osborne and Treasury says charities struggle to pay high contributions but cannot afford to leave schemes

George Osborne
George Osborne

The government should change pension rules to help charities in multi-employer schemes, the Charity Finance Group said today in a pre-Budget submission to the Chancellor, George Osborne.

The CFG, which this week changed its name from the Charity Finance Directors’ Group, says in the submission that charities often have difficulty affording high contributions to multi-employer defined-benefit pension schemes. But they also find it difficult to leave because they usually have to make large lump-sum payments, which they cannot afford.

The submission says a significant number of CFG members "are in a situation where they can afford neither to stay nor leave".

"At a time when their finances are being squeezed from all angles, the existing regulations mean that charities are being further penalised – trapped by a pension scheme from which they cannot escape and effectively prohibited from restructuring, merger, engaging in joint ventures, making redundancies or looking to take on additional public services as a means of adapting to a tougher economic climate," it says.

The CFG wants organisations to be allowed to pay off their liabilities gradually when they leave a scheme.

It also suggests measures to make it easier for organisations to pay off liabilities before they leave and to protect them from having to pay the debts of other organisations that are unable to pay.

The CFG said the government should consult on this issue within a year.

It also calls on the government to consult on a wide-ranging VAT exemption for charities that share back-office services.

A shared services exemption was announced in the notes for the Chancellor’s autumn statement. But the CFG said that the strict rules around it meant that many charities couldn’t benefit.

The CFG asks for more backing to create a Gift Aid database that would allow organisations to log donations more efficiently.

It also says the amount of "non-primary purpose" trading charities can carry out before having to set up a trading subsidiary is too low, and should increase from £50,000 a year to £250,000 a year.

The Budget will take place on 21 March.

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