The end of March 2010 will see the closure of the Scottish Voluntary Sector Pensions Scheme (“SVSPS”), run by the Pensions Trust.
David Davison, guest blogger on governance and finance for Civil Society, explains the stark reality of significant pension deficits, and the need for participants reviewing their benefit provision to arrive at a solution that meets their needs.
David specialises in providing pensions advice to charities and not-for-profit organisations, especially those who run their own final salary schemes or who participate in the LGPS and multi-employer schemes.
I noticed the positive announcement this morning that Signature and Care Support is to merge with Choice Support to create more jobs.
This is clearly good news but from a pensions perspective the change does highlight a major issue for any bodies changing status (e.g. incorporating or merging) where they participate in multi-employer pension schemes such a those run by local government, the Pensions Trust or similar. Such a change in status can trigger the unwelcome pension consequence of terminating the participation of one (or both) bodies in the scheme with the requirement to pay a very significant debt contribution to the scheme. The level of debt can be many times the size of that disclosed in the organisations accounts and can frequently impact on the organisations future success. It could also be levied even where there is no change to the numbers of staff continuing to participate in any scheme post the change.
This is an area where great care is required and early engagement with the pension scheme is essential as problems can frequently be overcome but only if arrangements are made in advance of any change. I’m not suggesting that this is the case here as I’m unaware of the pension background but it is a general note of warning to be prepared where any change in corporate status is contemplated.
Our regular blog author and industry commentator David Davison has now won a place as a fully commissioned blogger for Civil Society website. With extensive experience of pension and finance issue affecting the charitable and not-for-profit sector David will impart his wisdom (and hopefully some wit) on the subjects of governance and finance.
David explains “Clearly I’m delighted to have been selected by Civil Society to provide topical comment of their site. The Civil Society site brings together wide ranging issues that affect the charitable sector and I hope to provide some valuable insight, informative content and encourage debate on subjects I think the sector should be talking about.”
Read the blog that secured David’s success – “Between a rock and a very hard place – the looming pension crisis”, and keep an eye out for his further instalments.
David Davison is a director of Spence & Partners Actuaries and specialises in providing pensions advice to charities and not-for-profit organisations, especially those who run their own final salary schemes or who participate in the LGPS and multi-employer schemes.
The Pensions Trust has at last drawn a line under the Scottish Voluntary Services Pension Scheme with plans to close it to all future benefit accrual from April 2010. The knock-on effect of this decision is to highlight how wholly unsuitable it was for the many small charities and not-for-profit organisations who were encouraged to take part.
It also leaves many questions unanswered. Why was there such enthusiastic encouragement to participate in a pension scheme of this type? Why were these small organisations not given very clear guidance about the potential risks that they were exposed to as a result? Had they been, would so many have blindly taken part?
And the biggest question remains: what is going to happen to other similar schemes with participants all equally ill-equipped to deal with final salary liabilities?
David Davison is a Director at Spence & Partners, independent actuaries and consultants in Scotland and Northern Ireland.
Whilst the decision to close the Scottish Voluntary Services Pension Scheme (SVSPS) to all future benefit accrual from 2010 is just symptomatic of the wider economic and longevity issues closing numerous other final salary pension arrangements I certainly don’t view the decision totally negatively.
Having advised a number of clients who participate in this scheme, and indeed many in other schemes of a similar type, one thing is patently clear, namely that most of these small organisations shouldn’t have been allowed within 100 miles of a final salary pension scheme!! Read more »
I was trying to think of what constituted a really bad idea. My wife kindly suggested a few examples. Apparently, buying your significant other the book of the latest diet craze, however well intentioned, is likely to be counter productive. Equally bafflingly, she suggested that themed undergarments are also a bit of a no no.
In the financial world we’ve seen a few examples of late, Read more »
News reaches me that the Pensions Trust, who provide a multi-employer pension scheme covering 100’s of small charities and not for profit organisations has decided to close the scheme for all future benefit accrual from April 2010.
Now I’ve been banging on for a number of years about the headaches this scheme has been causing small charitable bodies (frequently without them even knowing about them!!). Read more »
In a recent article John Healey, Minister for Local Government suggested that the local government pension funding black hole was a myth and that these schemes would not cost tax payers more.
I wonder where he thinks the money will come from? Maybe quantitative easing has actually made him think that money can be made out of thin air.
Or maybe he thinks the expenditure can just be claimed for on expenses!!
MacMillan Cancer Support receive £750 from Liz Fergusson
Spence & Partners are pleased to support Macmillan Cancer Support with a donation of £750. The money was raised by donating the funds that would have been used to buy Christmas Cards. Instead, Spence & Partners’ clients received a festive and environmentally friendly e-greeting and staff were asked to select a charity they wished to support.
Liz Fergusson (pictured) presented the cheque to Emma Rae from the charity at the Spence & Partners Belfast office commenting that “Sending an electronic Christmas greeting gave us a great opportunity to demonstrate how a small change can make a significant difference to a charity we are delighted to support”.
Inappropriate and out of date pension arrangements could be significant for a growing number of charities.
Actuarial and consultancy firm Spence & Partners says many small charities and not-for-profit organisations have been encouraged to participate in local authority or multi-employer schemes. Read more »