Charity pensions are the "elephant in the room" that few voluntary sector organisations are equipped to face, according to Caron Bradshaw, chief executive of the Charity Finance Group.
Speaking at yesterday’s launch in London of the CFG publication Navigating the Pension Maze 2014, designed to guide charity finance leaders through the complex world of pensions, she asked what was the sector’s biggest problem.
"If you’ve been watching the sector press of late, you may be of the opinion that it’s Islamic extremism," she said. "I’m going to offer you a different one: pensions. Charity pensions are becoming an elephant in the room – problems that are growing in size and complexity, but which few are equipped to face."
In April, William Shawcross, chair of the Charity Commission, said that Islamic extremism was "not the most widespread problem we face in terms of abuse of charities, but is potentially the most deadly".
Bradshaw said yesterday that the issue of media and public perceptions of how charities handled their pensions was particularly tricky.
She said that although people were unlikely to withhold custom from a private company because of the way the company managed its pensions, or to withhold council tax if they disliked local government’s approach, they could choose not to give money to a charity. "It’s very easy for the media to portray this as donor’s money going to pension pots," she said.
John Tranter, chair of the CFG’s Pension Maze project, said: "With liabilities growing for many charities, pensions are occupying more and more of their resources and management time. One of the most significant long-term risks for those responsible for a charity’s financial position is the pension scheme – not just in terms of managing legacy issues but also of coping with changes in legislation."
Navigating the Pension Maze outlines five key pension trends that pose difficulties for charities. Apart from public perception, they are: the need for better governance as more charities adopt defined-contribution pension schemes; increased deficits, with many charity balance sheets coming "under severe pressure"; continued dilemmas with multi-employer schemes; and the roll-out of workplace pensions.
Under auto-enrolment of workplace pensions, all those earning more than £9,440 are automatically enrolled into pension schemes. "Auto-enrolment is a huge undertaking for charities, particularly those with low pension take-up already, where the additional cost of the scheme and administration complexity will be major challenges," the publication says.
The guide also addresses pension issues arising from the new Sorp accounting guidelines, which might be published this month.
In addition to Navigating the Pension Maze, the CFG also launched The Pension Manifesto yesterday, a document that sets out three requests to politicians in the run-up to next election.
They are that the charity world’s unique issues be considered in the development of all pension policy, that pensions are recognised as one of the central risks to the long-term health of charities, and that seven specific policy proposals to be adopted.