Catriona Scrimgeour is convenor of the Scottish Charity Finance Directors' Group and director of finance at the Bethany Christian Trust.
I was approached recently by an SCFDG member who expressed her concern at the effect full implementation of FRS17, which puts deficits of defined-benefit pensions on the balance sheet, has had on her accounts for this year.
Her charity is a member of a local authority final-salary scheme and would not be able to attract and retain staff if it did not offer this benefit to them. However, she is now concerned that funders will look at the accounts, which show a deficit, and be less likely to fund them and their pension scheme deficit. The major local authority pension scheme for the area I work in is still to provide its FRS17 figures, and too many charities are not yet aware of the impact this will have on their accounts.
Charities are left trying to fill this funding gap without recourse to the captive supply of council taxpayers that councils have. In fact, I believe recent calculations show that as much as 26 per cent of council tax goes towards pensions. At a time when many councils are cutting back funding and being asked to make efficiency savings themselves, how can charities ask for more funds to pay the extra that the council pension schemes now require?
There is also the question of whether the figures used by any employer in a multi-employer scheme are a reasonable estimate of the funding position for that charity. This depends on the type of scheme. Some schemes are segmented, with each segment being a separate employer within the scheme, whereas others are just one big pool. I am assured by an actuary friend that the separation of these pools is not completely at the whim of the actuary, but that there are guidelines laid down by a committee that should be followed.
I am afraid I have no easy answers to the problem of how to get funders to help us pay for pension scheme deficits, or I would be earning huge consultancy fees.
There will always be the ethical problem of what we are given money for when a donation is made to general funds. For example, an individual making a donation to a charity expects it to be used for the purposes of the charity. The question is whether paying off a pension scheme deficit is using money for charitable purposes.
It doesn't look as if there is any hope for final-salary pension schemes.
Should we be making an extra contribution for the fact that we are all going to live longer after the smoking ban takes effect? A 35-year-old who gives up smoking has a 60 per cent chance of living into their 80s instead of 25 per cent if they smoke. Mortality rates must change again, as a result increasing deficits further.
- Charities must fill a funding gap if they are part of local authority final-salary pension schemes
- There are no easy answers to how to get funders to help with deficits
- There is also an ethical dilemma in using donations to pay for gaps in pension schemes.