Charities sector sees funding level improvement

There has also been a 7% rise in average funding level of the DB schemes themselves, driven by a positive return on pension scheme assets.

The report notes that the last few years have been difficult for charities. The cost of living crisis has added pressure, as well as continued strains to fundraising. Many charities are also experiencing wage pressure from high inflation while still recovering from the economic effects of other recent challenges, including Covid-19 and the ongoing Russia-Ukraine war. 

Heather Allingham, actuary & head of pensions consulting for charities at Hymans Robertson, noted the improvement in funding positions over the last year were driven primarily by market conditions, and that despite volatility, many charities entered 2023 a step closer to being able to buy-out their DB pension 

Allingham said: “We expect 2023 is going to be busy for risk transfer and charities should engage with their pension scheme trustees to re-assess their end game plans for their schemes.

On inflationary pressures being experienced by the charity sector, Allingham added:

“Another challenge for 2022/23 has been high inflation. This has hit some charities hard in terms of wage inflation as well as putting pressure on income.

“At the same time, pension scheme trustees may be seeking support from their charity sponsors to give pension scheme members discretionary pension increases to help their pensions keep pace with inflation. Charities should consider and agree their approach to these requests.”