Conservation charity the National Trust is closing its defined benefit scheme to future accrual following a large increase in the deficit, but the union is considering further action to reopen negotiations.
Many charities have struggled with the wider pressures placed on DB schemes' liabilities, but drops in government spending and donations have also strained budgets.
Key facts
The most recent valuation showed the deficit reached £116m in 2014, up from £69m in 2011
Roughly 1,200 members will be affected by the closure of the scheme
The defined contribution scheme has roughly 4,500 members, and matches contributions up to 10 per cent
Annual deficit recovery payments will increase to £8.5m next year from £3m this year, rising by CPI+1 per cent annually until 2029
Earlier this year, charity Community Service Volunteers sold £2.9m of property assets to reduce its deficit within the London Borough of Islington Pension Scheme.
The National Trust scheme will close on March 31 2016. The closure follows the scheme’s 2014 valuation that calculated the deficit at £116m on April 5. This is up from £69m three years earlier at the 2011 valuation.
The employer started formal consultation with active scheme members on March 9 this year, which closed on May 11.
Kevin Warden, negotiations officer at Prospect, the trust’s recognised union, said: “We don’t agree with the closure and we will be seeking members' views and seeing what their wishes are,” adding: “It’s a shame we weren’t involved with the consultation at an earlier stage.”
The scheme closed to new members in 2003 and holds around 16 per cent of the permanent workforce.
Recovery plan
Charities will find it hard to defend increased spending on covering pensions deficits
Anjelica Finnegan
The closure will impact around 1,200 members, who will be eligible to join the trust’s defined contribution scheme.
The DC scheme has roughly 4,500 members and offers matching contributions of 4-10 per cent.
The trust also announced measures to mitigate the impact of the closure.
“These include delaying implementation until March 31 2016 and deciding not to remove the link with final salary,” the trust said in a statement announcing the closure.
A spokesperson for the trust said the proposed life assurance of four times salary in the original proposal had been doubled to eight times salary.
He added: “For ill health we have retained our original proposal of moving staff onto our income protection scheme but have introduced an additional benefit which will enable staff currently in the scheme to be considered for an unreduced pension (based on their service to March 2016) should they remain unfit for work at the end of the income protection period.”
Scheme trustees agreed a recovery plan with the trust, with current £3m annual contributions rising to £8.5m from 2016. These will rise by CPI+1 per cent annually until 2029.
Tough times for non-profits
Anjelica Finnegan, senior policy and public affairs officer at Charity Finance Group, which champions best practice in charities' financial management, said: “It is increasingly common for charities to focus on the long-term goal to wind up their DB schemes.
“Of course all sectors and industries face similar problems with such schemes. However, given that a significant proportion of charities’ income comes from public donations and government funding, charities will find it hard to defend increased spending on covering pensions deficits.”
Patrick Bloomfield, partner at consultancy Hymans Robertson, said the place charities occupied between the private and public sectors meant they were slower to adapt to the shift towards DC than their private sector counterparts.
"They'll often compete with the public sector for resource, whilst they're under private sector pressures commercially," he said.
"Charities tended to be 5-10 years behind the private sector [on the move from DB] because they were trying to keep pace with public sector benefits. They've really been caught in the crossfire."
