Expect more scrutiny of pension schemes, says report

A paper from the pensions firm Hymans Robertson says the Pensions Regulator will be taking more interest in charity pension schemes after the collapse of BHS and Carillion

The report
The report

Charities should expect more regulatory scrutiny of their pension schemes after the collapse of the companies BHS and Carillion, according to a new report on pensions in the charity sector.

In a report by the pensions firm Hymans Robertson, DB Pension Funding in the Charitable Sector, the firm says that because of the high-profile collapse of several major pension schemes, in particular those operated by BHS and Carillion, the Pensions Regulator will be pushing organisations to fund their defined-benefit pension schemes.

The warning follows the publication of the Pensions Regulator’s 2018 annual funding statement in April. The new report, which is based on the 40 largest charities with defined-benefit pension schemes, says the annual funding statement was a precursor to an update of the defined-benefit funding code of practice.

The report says the Pensions Regulator has also announced increased scrutiny of pension schemes with assets of less than £80m – which is likely to include 35 per cent of the charities featured in the report – and an expectation of additional disclosures in these schemes’ next triennial valuation submission.

It says the regulator has concerns about governance and conflicts of interest in some smaller pension schemes.

The report says that the average pension deficit is worth 33 per cent of annual net unrestricted income.

Despite this, only 3 per cent of net unrestricted income is paid into pension schemes by the charities featured in the report.

The average defined-benefit scheme funding level is 82 per cent, the report says, and 58 per cent of charities have closed their schemes to future accrual.

Of the charities featured in the report, 18 per cent have a pension surplus and the average pension deficit is worth 22 per cent of unrestricted reserves.

The report comes just weeks after a letter from the Pensions Regulator to the Work and Pensions Select Committee said that two-thirds of defined-benefit pension schemes at charities were "strong" or "tending to strong".

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