Pension deficit at top charities down by £300m

A Third Sector study of 155 well-known charities finds the deficit for defined-benefit pension schemes has declined from £1.6bn to £1.3bn

Good news on pension deficit (Photograph: Bloom Productions/Getty Images)
Good news on pension deficit (Photograph: Bloom Productions/Getty Images)

The total pension deficit at the best-known charities has fallen by almost £300m in 2017/18, Third Sector research has found.

Third Sector discovered that the total deficit for defined-benefit pension schemes among the top 155 charities was £1.3bn, down from £1.6bn for the previous year.

The figures come from the most recent accounts – broadly covering the years 2017 and 2017/18 – of the 155 charities that make up Third Sector’s Charity Brand Index, which includes the most prominent names in the charity sector.

The mean average pension deficit increased, however, from £10.3m per charity to £18.5m.

Only 72 of the 155 charities disclosed their pension deficits in their accounts. Charities with defined-contribution schemes do not have to disclose the details, but those with defined-benefit schemes do.

Ruth Bromley, pensions advisory senior manager at the accountancy firm BDO, said: "It is clearly welcome news that reported pension deficits in the charitable sector have fallen, but pension liabilities continue to represent a significant burden for many charities.

"Competition for charitable donations remains high and grant funding continues to be constrained, so difficult decisions will have to be made regarding the use of charities’ funds to repair deficits, which would otherwise be available for charitable purposes."

Bromley said that a covenant review from experienced advisers could help charities to decide what would constitute a reasonable level of contributions.

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