Pensions Trust closes defined-benefit schemes to its staff

Chief executive Stephen NichoIs says the trust, which recommends such schemes to others, has to 'recognise what's happening in the marketplace'

Stephen Nichols
Stephen Nichols

The Pensions Trust no longer plans to offer its staff the chance to participate in its own defined-benefit pension schemes, according to a consultation document seen by Third Sector.

The document said the trust, the specialist pensions provider for the charity sector, had been considered to have a "high-risk" covenant status by the board of Verity Trustees, its corporate trustee.

This means it is thought to have too high a risk of not being able to meet its obligations to the Care DB pension scheme, which is one of its own products.

"We have been notified by Verity Trustees Ltd, the corporate trustee of the Pensions Trust… that the Pensions Trust must either cease to offer future accrual in the Care DB structure and switch to Care DC for future accrual from 1 October 2013 or withdraw from the Care Scheme altogether," the trust said in its consultation document.

Care DB is the only scheme it offers to existing staff. It is already closed to new members.

Stephen Nichols, chief executive of the Pensions Trust, said that his organisation had a turnover of £32m, and paid about £33,000 a year to make up its deficit to the scheme. However, he said that if, for some reason, the Pensions Trust had to leave the scheme and pay off all of its debt, it might owe about £5m to the Care scheme.

He said that section 9.2 of the trust deed and rules allowed the trust access to all the funds it had under management, about £5bn, if it needed to meet its expenses.

"On that basis, we probably have the strongest covenant of any organisation in the scheme," Nichols said.

However, the corporate trustee had said that this should not be taken into account when considering risk.

"We have to have regard to what’s happening in the marketplace," Nichols said. "We have to recognise that other organisations may be struggling with their own covenants."

Alan Collins, a pensions specialist at Spence & Partners, said the decision was worrying because the Pensions Trust advocated the affordability of defined-benefit pension schemes.

"This is a company that stands behind defined-benefit pension schemes, but they themselves aren’t able to stand the risks these schemes present, and are closing access to their own staff.

"They are saying DB is affordable, but they themselves can’t afford it."

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