Growth Plan pensions deficit increased by 20 per cent last year

Pensions specialist David Davison says there is a risk of a domino effect that would "close down a large chunk of the charity sector"

David Davison
David Davison

The deficit in the Growth Plan, a pension scheme for about 1,700 charities, increased by 20 per cent in a year, according to a letter sent to participating organisations last month.

The deficit in the plan, which is run by the Pensions Trust, increased from £234.3m to £280.6m in the year to 30 September 2012. There was also a 20 per cent increase in the deficit the previous year, from £195.9m.

According to figures published on the Pensions Trust website, the Growth Plan deficit has since risen further, to £286.8m. The scheme has assets of £819.2m and liabilities of £1.106bn, making it 74 per cent funded.

This is down from 77 per cent in September 2011 and 80 per cent in September 2010.

The Growth Plan has been running since 1946. It consists of three multi-employer pension schemes, regarded as 'defined-benefit' because they guarantee a minimum level of payment, and a fourth 'defined-contribution' scheme, which does not guarantee any minimum payout.

The first two schemes are already closed. Growth Plan 3 will close in October.

All further contributions will be paid into the defined-contribution scheme, Growth Plan 4.

David Davison, a pensions specialist at Spence & Partners who represents several members of the Growth Plan, said: "The big issue for this scheme is its orphan debt – the money that charities still in the scheme are paying out to cover the liabilities of members who have left or closed.

"The scheme has 20 per cent orphan debt, which is roughly the same as the deficit. As more charities close, the orphan debt will get bigger and there's a real chance of a domino effect that will close down a large chunk of the charity sector."

Logan Anderson, head of customer relations at the Pensions Trust, said: "Each year the actuary provides an update of his estimate of the cost of buying out the benefits of the scheme with an insurance company. This calculation is compared with the assets of the scheme to calculate a potential buy-out deficit.

"Each year the figure is subject to fluctuation: assets can rise or fall in value; potential liabilities are subject to change especially where long-term interest rates fluctuate; and potential liabilities are also affected by the buy-out market itself, which might be more or less attractive at any given time."

David Ainsworth

David Ainsworth recommends

The Pensions Trust

Read more

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in
Follow us on:
  • Facebook
  • LinkedIn
  • Twitter
  • Google +

Latest Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners


Expert Hub

Insurance advice from Markel

Guide: What insurance does your charity need?

Guide: What insurance does your charity need?

Partner Content: Presented By Markel

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now