Pension provision is an important issue for charities. Over 800,000 people work in the voluntary sector and pensions are a key financial issue for charities.
Charities have historic pensions legacies as well as meeting the new challenges of auto-enrolment.
CFG is campaigning to improve the pensions environment for charities and has produced two key publications.
CFG regularly responds to consultations on pensions affecting the sector, please check our ‘Have your Say’ section for more information.
Charities, like all employers, will be obliged to enrol eligible staff onto a pensions scheme under new rules. This will include part-time, fixed term and agency staff, unless they decide to opt-out. The pension scheme needs to fit certain criteria and employers have the option of using the Government’s National Employment Savings Trust (NEST).
At least 8% of an employee’s earnings must be paid into the scheme made up of 3% employer contributions; 4% employee contributions & 1% tax relief.
This will significantly impact many charities. Organisations will have to budget and find resources to fund pensions for staff.
Although employer contributions are due to be phased in to help with the adjustment (starting at a contribution level of 1% and growing to 3%), formulating a comprehensive plan and budgeting for the change before the legislation comes in to force is essential.
Charities with between 30-49 staff will need to implement auto-enrolment by the 1st October 2015 and charities with less than 30 employees will need to do so between 1st January 2016 and 1st April 2017.
CFG published 'Auto-Enrolment for Small Charities: What You Need to Know' (.pdf) on 8th September 2015, which provides practical information for smaller organisations.
Foster Denovo have produced a briefing note for CFG members - Get ready for the change - which outlines a number of key considerations that could help employers begin their preparation.
CFG will be continuing to provide advice and support for charities on auto-enrolment, please contact the policy team for more information.
Multi-employer defined benefit pension schemes
Charities that are part of multi-employer defined benefit pension schemes face particular challenges in managing these schemes, many of which are in deficit.
A volatile stock market has meant many charities have lost significant amounts of money from their pension funds. A large pension deficit does not necessarily mean bad news. Charities will not have to find the whole deficit at once and pensions deficits can be made good over several, often many, years.
A charity will only be insolvent if cash contributions to the deficit become unaffordable. Charities with deficits need to ensure that they seek professional advice on the deficit contributions that need to be made, as well as ensuring that their actual position is communicated clearly.
CFG is working with the Department for Work and Pensions, regulators and advisors to handle legacy issues and reform the system so that charities’ sustainability is not threatened.
The government is consulting on the future of multi-employer defined benefit pension schemes cessation debt, the so-called section 75, and CFG is responding to the call for evidence. Please contact the policy team for more information.
CFG are currently in the process of setting up a pensions forum.
This will enable members to discuss pensions-related issues and ways that we can improve the pensions landscape for charities.
If you would like to be involved in the forum, attend meetings or would like to raise any policy challenges that the forum should address, please email the policy team.