Debts from a charity pension scheme that closes to new contributions at the end of this month could potentially bring down many of the organisations involved, pensions experts have warned.
Actuaries advising some of the 137 charities in the Scottish Voluntary Sector Pensions Scheme, which has liabilities of about £65m, said the scheme was less than 70 per cent funded, which meant employers would have to make large payments to meet the shortfall.
The fund, run by specialist charity pensions provider the Pensions Trust, is run on a 'last man standing' model, meaning that if one charity closes down, those remaining will have to meet its liabilities.
"There's a potential domino effect," said Jonathan Black, managing director of actuarial firm CPRM. "If one falls over, it puts more pressure on all the others. If you're one of the stronger members of the scheme, you could find yourself facing many other charities' debts.
"They've tried to shut the stable door now by closing the scheme, but for many members the problems may already be too large to manage. The horse may already have bolted.
"We've tried to help charities buy out of the scheme, but they've run into prohibitive costs."
David Davison, a director of actuaries and pensions consultants Spence & Partners, said the scheme was "wholly unsuitable" for many of its members. "Some of these charities are unincorporated, so trustees are personally liable for these debts," he said. "Many charities should not have been within 100 miles of a final-salary pension scheme."
He said many other multi-employer schemes could face similar difficulties.
"Until the closure announcement, many of the organisations participating were blissfully unaware of the potentially catastrophic pension liabilities they face," he said. "Many charities in other pension schemes around the country could be in the same position."
Stephen Nichols, chief executive of the Pensions Trust, said: "Employers joining the scheme were clearly satisfied that it was an appropriate pension arrangement for their organisation at the time of joining.
"Changes occurred with the introduction of legislation in 2005 that increased the risks associated with employer membership of such schemes.
"The impact of the legislation was communicated to the employers by the Pensions Trust."