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Charities Complain They Cannot Afford Pension Liabilities 

By Teresa Hunter, The Scotsman

United Kingdom

November 28, 2005

Britain's charities look set for a major row with watchdogs as their pensions funding crisis deepens. This week they will receive the final bill for millions of pounds owed to the Pension Protection Fund, while a survey has revealed that 
the sector is nursing a £557m black hole. 

The Charity Finance Directors' Group (CFDG) conducted a private survey among 38 of its largest members, which revealed that the voluntary sector faced outstanding pension liabilities of £2.5bn, which was only backed by 79% of assets. 

Some of the biggest charities, which employ tens of thousands of nurses, social workers and other carers, are warning that services to children, the disabled and the elderly may have to be cut back and staff numbers reduced if they are forced to hand over millions of pounds to the PPF. 

The charities are bracing themselves for more bad news next week when the PPF reveals how much they will have to pay. 

Stephen Nichols, deputy chief executive of the Pensions Trust which runs pension schemes for 30 voluntary organisations, said: "This is a tax on the charitable sector and the only way the money can be found is by curtailing the good works the charities are able to do." 

Clare Smith, director of HR at Leonard Cheshire, which employs 8,000 carers including many nurses, said: "This is a very serious issue for us. We are the largest employer in the voluntary sector and we can't just walk away from the people we care for. 

"But we are having to put more and more money into the pension scheme, and this is money we cannot use to help the disabled." 

The CFDG discovered that its 38 largest members had pension liabilities of £2.5bn, with funds supporting 79%. This leaves a £557m black hole, which the pensions regulator is demanding is filled within 10 years. 

The charities, with a £6bn annual turnover, believe this would place an intolerable burden on their budgets and are appealing for a longer timetable. 
They have also asked the Pension Protection Fund for "special status" which will allow them to pay less than companies. 

Barnardo's finance director Ian Theoreson explains: "We can't just raise our prices and there are no profits to divert. The public sector pensions deal has not helped at all, because we must compete with the government for social workers and other care staff. 

"We simply don't have the ability to raise money the way the corporate sector can." 

Barnardo's has a £68m deficit on its £343m fund, and with 80% funding is in line with the rest of the sector. The biggest charities, such as Cancer Research, National Children's Home and the Social Housing Fund, have the biggest deficits. 

The Pensions Trust, which is facing a £2m levy but fears it could be as high as £4m, is convinced that the PPF has got its calculations wrong. 

Nichols argues: "We had it examined by an independent actuary and he confirmed our belief that the calculation for working out our premium is fundamentally flawed. 

"Charities don't go bust. All this money will do is subsidise the corporate sector, with its history of failing pension schemes. There is a genuine case to be made for charities to be exempted." 

Help the Aged spokesman Mervyn Kohler1 said his main concern was the impact all this would have on the public's generosity. 

He said: "If we have to cut back the good work, and they begin to see their donations going into a pension scheme or to prop up other pension schemes, that is not a very good proposition to have to put to them."


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