Charities using donations to plug pensions black hole
BRITAIN’s biggest charities face a pensions crisis that is forcing them to use their earnings to cover retirement payouts.
A Daily Mail investigation found that charities including Barnado’s, RSPB and Cancer Research UK are pumping millions of pounds into pension plans each year to cover their enormous costs.
As much as 7p in every pound brought in by charities over the past year has been used to plug black holes in their schemes exacerbated by record low interest rates. In some cases, they are using donations to cover the shortfalls.
Last night experts called on the UK Government to stop charities using donations to plug gaps in pension schemes and give them more time to cover the shortfalls.
John Ralfe, an independent pensions expert, said: ‘The people who give money to charities believe they are handing over their cash to further good work, not to plug black holes in organisations’ pension funds. This is becoming a huge looming problem for charities.’
Former pensions minister Ros Altmann said that if charities were allowed payment ‘holidays’, giving them longer to find the cash to fund pension promises, they might not have to use donation money.
Most big charities offer pensions funded by the income they receive from donations, sales, investments and other activities. Many admit they are struggling to cope with the cost of providing final salary plans, which offer a guaranteed annual amount depending on career-length and earnings.
Due to low interest rates and people living longer, scores of private employers face a shortfall in the amount they need to cover promises made to workers years ago. Over the past year the size of these black holes has risen from £261billion to £459.4billion.
In August the RSPB told staff it is pumping an extra £4.25million a year into its scheme to try to cover a £59million shortfall. From next year this will rise to £5.35million a year, with payments due to last until 2030. It had an income of £137.3million last year, meaning an extra 3p in every pound went to pay pensions. Guide Dogs faces a £54million shortfall. According to last year’s annual report, it had to put in an extra £6.7million last year – almost 7p in every pound of the £103million it earned. The National Trust has a £120million deficit. This year it increased payments from £3million to £8.5million a year. A spokesman said no donations were used. Barnardo’s is putting an extra £6.3million a year into its final salary scheme – rising to £10million by 2027 – to close a £115million deficit.
Cancer Research is using £8.5million a year to shore up its £55million deficit. A spokesman said: ‘It is a requirement that we make payments towards this deficit. We have been able to reduce the level of annual contribution to £5million and expect the deficit to be eradicated within ten years. The payments to the scheme represent less than 1 per cent of fundraising income. For every £1 donated to us, 80p is used to beat cancer.’
The RSPB said it had taken ‘steps to address its pension deficit’, adding: ‘Only around 3 per cent of our total income is spent on deficit recovery payments each year.’
Barnado’s said: ‘Of every £1 donated, 91p goes to providing care for children. Of the remaining 9p, 6p goes on fundraising and 3p pays for the pension and governance of Barnardo’s.’
The RNLI, which has a £22.6million pensions shortfall, said: ‘Donations go towards saving future lives at sea not the deficit.’ Guide Dogs was unable to comment.
‘Looming problem for charities’