Charities warned over proposed changes to pension rules

Charities are being urged to be proactive to avoid being overwhelmed by new pension costs that could arise as a result of changes in regulation.

The Charity Finance Group is warning that the new regulations, which are expected to come into force next year, will significantly change how charities and other employers fund their defined benefit pension schemes.

The changes could mean that charities have less time to deal with shortfalls in their pension scheme and will have to increase annual contributions.

Under the new rules, there will be two approaches to funding pensions, said the CFG: a standardised and prescriptive “fast track” approach, which could impose tough funding targets, or a more complex “bespoke” approach, where charities and other employers would need to spend time and money justifying why they need to be treated differently.

The rules are still being drafted and the CFG said they were being built around the circumstances of for-profit employers, with little focus given to the issues facing the charity sector. 

The Pensions Regulator is expected to issue its second consultation on the new rules later this year, which will provide a final opportunity for charities to feed back their views and influence the regulation.

Roberta Fusco, director of policy and communications at CFG, said: “While welcoming reform, we are keen as ever to ensure that charities can fully meet their obligations to all stakeholders and that the charity context is reflected in any new code. 

“Helpful discussions with TPR have been followed by provision of a detailed paper, addressing issues from a charity angle. 

“We look forward to engaging further as the consultation progresses.”

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