PRESS RELEASE
CharityFinancials shows major UK charities are feeling the pinch of pension liabilities
New Research from Charityfinancials.com has revealed that of the top 5,000 UK charities, 522 have a pension liability totalling £1.66bn. Charities operating pension schemes may have to plug this hole from other income sources (including donations) to ensure that all scheme members are provided for during retirement.
It appears that charities who have provided schemes based on the employee’s final salary (defined benefit), rather than the value of a pot of investments managed by a third party (defined contribution), appear to be suffering the most.
This news couldn’t have come at a worse time for the charity sector. The adverse economic climate of the past 2 years has bumped the pension deficit of the UK’s largest charities up by 51.1%.
Research from CharityFinancials.com has shown the charity sector reduced its pension deficit between 2006 and 2008 from £1.9bn to £1.1bn, but the recession during 2008 and 2009 has caused it to rise.
Organisations with the largest pension liabilities are set out in figure 1.
The list includes the National Trust, which experienced an actuarial loss of £71.734m on pension plan assets resulting in a closing obligation of £336.256m. The National Trust states: “the stock market fall led to a deficit in the final salary pension scheme, and this will be addressed through the planned increase in contributions to the Pension Scheme over the next 25 years”.
Barnardo’s, a charity highly dependent on public sector contracts, saw its pension liability rise by £17.4m over the previous year resulting in a closing obligation of £364.7m.
The current problem is that poor investment conditions have widened the pensions funding gap to worrying proportions, affecting total fund values.
Closer inspection of the ten charities with the largest pension liabilities indicates that their deficits are not just down to decreases in the values of the pension scheme assets, but also increases in actuarial losses. This combination has further increased the closing obligation of the pension funds. In this way six of the ten organisations listed in figure 2 have experienced decreasing values of pension scheme assets and seven have suffered an increase in obligations.
Managing the liability
As in most economic cycles, the markets will bounce back and when they do, there will be an increase in the value of pension scheme assets. This will go some way towards reducing the overall long-term liability in years to come. In the meantime, charities and social enterprises have a major challenge in managing the impact of this potentially huge problem.
Figure 1: Charities with the largest pension liabilities
| Wellcome Trust | Barnardo’s | National Trust | RNLI | Action for Children | Nuffield Health | British Film Institute | Guide Dogs for the Blind | Oxfam | National Museum Wales | Total | |
| Year | 30/09/2009 | 22/06/2010 | 13/02/2010 | 31/12/2009 | 31/03/2009 | 31/12/2009 | 31/03/2009 | 31/12/2009 | 30/04/2009 | 30/03/2009 | |
| Currency | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Change in value of Plan Assets | |||||||||||
| Opening Net Assets of Scheme | £101.000m | £349.800m | £332.346m | £148.600m | £297.278m | £211.300m | £43.081m | £112.558m | £68.100m | £65.195m | £1729.258m |
| Company Contributions | £8.400m | £9.300m | £8.235m | £10.000m | £11.275m | £9.600m | £1.960m | £6.803m | £3.900m | £3.026m | £72.499m |
| Member Contributions | £0.600m | £4.400m | £3.459m | £2.000m | £3.512m | - | £0.622m | £1.395m | £0.700m | £0.866m | £17.554m |
| Benefits | -£3.600m | -£16.100m | -£11.234m | -£6.200m | -£10.410m | -£10.100m | -£2.311m | -£4.813m | -£1.700m | -£3.239m | -£69.707m |
| Investment return of plan assets | £8.800m | £23.700m | £22.569m | £9.800m | £20.451m | £12.400m | £3.078m | £6.958m | £5.000m | £4.128m | £116.884m |
| Acuarial gains/losses | £5.600m | -£69.600m | -£71.734m | £13.100m | -£64.948m | £5.700m | -£12.264m | £11.021m | -£18.400m | -£21.258m | -£222.783m |
| other | - | - | - | - | -£4.115m | - | £0.152m | - | - | - | -£3.963m |
| Closing Net Assets of Scheme 2009 | £120.800m | £301.500m | £283.641m | £177.300m | £253.043m | £228.900m | £34.318m | £133.922m | £57.600m | £48.718m | £1639.742m |
| Change through year | £19.800m | -£48.300m | -£48.705m | £28.700m | -£44.235m | £17.600m | -£8.763m | £21.364m | -£10.500m | -£16.477m | -£89.516m |
| Change in Value of Obligations | |||||||||||
| Opening Obligation | £175.800m | £397.600m | £326.006m | £151.300m | £313.900m | £238.500m | £68.401m | £140.222m | £81.100m | £76.949m | £1969.778m |
| Service Costs | £10.600m | £5.700m | £5.270m | £5.500m | £4.218m | £1.400m | £1.931m | £3.111m | £1.000m | £2.562m | £41.292m |
| Interest Costs | £11.300m | £25.300m | £20.727m | £9.600m | £20.316m | £15.300m | £4.317m | £8.124m | £5.100m | £4.699m | £124.783m |
| Actuarial gains/losses | £28.800m | -£52.200m | -£7.972m | £55.400m | -£35.706m | £56.100m | -£8.820m | £17.137m | -£4.100m | -£9.645m | £38.994m |
| Benefits Paid | -£3.600m | -£16.100m | -£11.234m | -£6.200m | -£10.410m | -£10.100m | -£2.159m | -£4.813m | -£1.700m | -£3.239m | -£69.555m |
| Contributions by Members | £0.600m | £4.400m | £3.459m | £2.000m | £3.512m | - | £0.622m | £1.395m | £0.700m | £0.866m | £17.554m |
| Other | - | - | - | - | -£3.330m | - | -£0.152m | - | - | - | -£3.482m |
| Closing Obligation 2009 | £223.500m | £364.700m | £336.256m | £217.600m | £292.500m | £301.200m | £64.140m | £165.176m | £82.100m | £72.192m | £2119.364m |
| Change through year | £47.700m | -£32.900m | £10.250m | £66.300m | -£21.400m | £62.700m | -£4.261m | £24.954m | £1.000m | -£4.757m | £149.586m |
| Shortfall | -£102.700m | -£63.200m | -£52.615m | -£40.300m | -£39.457m | -£72.300m | -£29.822m | -£31.254m | -£24.500m | -£23.474m | -£479.622m |
| Pension Liability | £95.200m | £63.200m | £52.615m | £45.600m | £39.457m | £32.169m | £29.822m | £27.662m | £24.500m | £23.474m | £433.699m |
-ENDS-
For further information, please contact Katy Dunningham: kdunningham@waterlow.com,
Tel. 020 7565 8201
Notes to Editors:
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