Regulator targets pension scheme deficits in series of papers on risk

The Charity Commission has told charities they should explain how they plan to deal with the issue after it found three charities with combined deficits of more than £320m

Sam Younger
Sam Younger

The regulator has today published a report on pension scheme deficits as part of a new series of papers on risks to charities, identified by looking through annual accounts.

As part of the research for the report, the regulator identified 740 charities that had shown pension scheme deficits in their annual accounts, and randomly selected 97 for a more detailed review.

The regulator found that the 97 had a combined deficit of £617.4m. Three of those had individual deficits of more than £40m and had a combined pension deficit of £320.2m.

A further 17 had deficits of between £5m and £40m, totalling just under £200m.

In response to the findings, the commission said that some charities were not adequately explaining how they were dealing with the financial risks posed by their deficits.

The report reminds charities that they should use their annual reports to set out how they are dealing with the risks posed.

It says that only 31 of the 97 reports examined by the commission included an explanation of the financial implications of the charity’s pension scheme deficit and what trustees planned to do about it.

The regulator said it would be "engaging with the trustees of one charity with a large pension scheme deficit, whose annual report did not state whether the charity had obtained the financial support it needs to continue or the action it is taking to deal with its deficit".

A spokeswoman for the commission said she was unable to name the charity.

The commission said that seven charities had deficits totalling more than their unrestricted funds and larger than 20 per cent of their annual incomes.

Sam Younger, chief executive of the Charity Commission, said pension deficits could pose a potentially serious risk for charities.

"This report demonstrates that some charities do not adequately explain how they are dealing with their pension deficits in their annual reports, thereby missing out on an opportunity to demonstrate to their donors and beneficiaries that they are tackling the problem appropriately," he said.

The commission said it understood that some trustees whose charity’s pension scheme deficit was relatively small might have decided the financial risk was minimal and did not merit inclusion in its annual report.

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