Posted on: 12th June 2020
According to a recent report, 75 per cent of charities across the UK are facing a funding ratio of less than 100 per cent for theirplans. It is recommended that these charities suspend contributions before the pension deficit worsens.
Charities in England and Wales meet an increase in pension deficits that will intensify financial hardships they are currently facing as a result of the coronavirus pandemic. This is according to a report from Hymans Robertson.
The report analysed the income of 40 of the largest charities in England and Wales, with the average funding ratio of their defined benefit plans being 92 per cent. What’s more, the average pension deficit is 15 per cent of unrestricted reserves. 24 per cent of these charities have a funding surplus, according to the report.
With 75 per cent of charities currently facing a funding ratio of less than 100 per cent, and the pandemic creating financial struggles for both fundraising and retail income, the report concludes that suspending contributions is the best solution.
In March, theRegulator published guidance that highlights the suitability of suspending defined benefit plans at the moment.
The preport read: “The COVID-19 pandemic has placed many charities under significant financial strain with fundraising and retail income particularly badly hit and with a need to conserve cash,” said Alistair Russell Smith, head of corporate DB at Hymans Robertson, in a news release. “In many cases there is additional concern as DB pension deficits have also increased. On top of this, there is extra worry for pension schemes in the sector as forthcoming regulatory changes are putting pressure on charities to pay off pension deficits quicker.”
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