Minister suggests short-term 'fixes' for charities in multi-employer pension schemes

A charity that fears having to deal with a shortfall could leave just one person in the scheme, Steve Webb tells the Charity Finance Group conference

Steve Webb (photograph: Lyonsdown)
Steve Webb (photograph: Lyonsdown)

Steve Webb, the pensions minister, has said that charities trapped in multi-employer pension schemes could make use of various "fixes".

Speaking at the Charity Finance Group’s annual conference in London yesterday, Webb told delegates that if any charity feared building up liabilities in a multi-employer scheme and worried about pulling out because it might make them liable for any shortfall, they could leave only one person in the scheme.

"As long as you leave one member in the scheme you can pull everyone else out and you don’t trigger employer debt," he said.

Webb said that charities should not have to do "barmy things" like that to get round government rules, but it could be a short-term option for struggling organisations. He suggested charities could also consider segregating multi-employer schemes, which would reduce the scope of their liabilities.

The Charity Finance Group estimates that several thousand charities have employees in multi-employer, defined-benefit schemes. Many cannot afford to make the level of contributions required for each employee in the scheme – often more than 20 per cent of their salaries.

But leaving a multi-employer scheme is extremely difficult because it requires a charity to make up all of its deficit in one go.

Webb said that the Pensions Bill, included in the Queen’s Speech yesterday, would contain a new remit for the Pensions Regulator to take into account the long-term sustainable growth of the employer. 

"One of the arguments we hear is that the regulator encourages the trustees to be what is called ‘reckless and prudent’," he said. "Our message is that you don’t have to pay off the deficit as fast as possible – having a viable employer is the way liabilities get paid."

Webb said that the Department for Work and Pensions had been working on a study with the charitable sector – announced last month – to examine what improvements could be made to the rules on employer debt and multi-employer schemes.

A working group had now been set up with the CFG and the Cabinet Office to "thrash out" the issues, he said. "We are looking at whether we need to change primary legislation, secondary legislation or guidelines," he said. "There might be a range of solutions to these problems. I don’t want to give you the impression there is an easy fix.

"We have to address these things – they might have been allowed to drift for far too long. But we are where we are, which his why I’m here today to say we are engaging in earnest with this issue." 

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