Charity schemes are stronger when working in partnership

Funding levels at the largest charity pension schemes have seen an improvement from 81% to 99% in the years between 2019 and 2024.

Their sponsors’ reserves – including non-pension money – have also grown from £39bn to £50bn, while aggregate liabilities have fallen from £9bn to £7bn.

Meanwhile, these schemes have seen their aggregate income increase from £12.6bn in 2019 to £15bn this year.

This is fantastic news for charity pension schemes, but we must not get carried away with the apparent health of the sector. Aggregate figures are a useful indicator, but there are many schemes in the charity sector that struggle to find adequate resources.

Understanding charities’ pension challenges

The Charities Pensions Club’s annual survey of members shows that governance remains the greatest single concern, though it manifests itself in different ways.

Many funds are overseen by the financial director, or another officer. Though they will be supported by, possibly, a professional trustee and a small number of advisers, pensions is not their core skill and they often find themselves feeling rather exposed.

If that is you, I have some good news for you. Charities are no less capable of delivering good DB governance – despite limited budgets – because the skillsets they have developed in the charity sector are invaluable in running a pension scheme.

When speaking at our annual conference recently, Anne Lechley, professional trustee and scheme manager at Pi Partnership, emphasised that the governance of a pension scheme is not that different to the seven principles of the Charities Commission Code.

Lechley said: “In common with the Code, taking leadership and integrity as a given, running a pension scheme successfully requires focus on supporting good decision making and board effectiveness through provision of timely and relevant information to its trustees, management of risk through planning and pre-empting issues and openness and accountability through demonstrable processes.”

Preparation, preparation, preparation

The first thing any charity fund must do is set clear objectives and undertake high-level planning to cover possible expenses for support, work projects and so on.

Next, it is imperative to determine the most important things to focus on. These will tend to fall under a category of ‘must-do’, such as statutory requirements, then you may add other items that add value and have relevance across the membership. Finally, there are those things that will add value, but that may only affect a few people.

It is said that a problem shared is a problem halved. Finding appropriate support is essential, but that need not only be in the form of professional advisers.

Our members tell us that sharing their experiences does more than provide reassurance about their decision making. It gives them new ideas they wouldn’t get elsewhere, and empowers them to take these back to their advisers.

The charity sector has many membership groups that offer this kind of interaction at relatively low cost. Peer networks don’t simply represent a day out of the office, but can truly offer an insight into best practice.

Chloe Scragg is the director of the Charities Pensions Club, a peer networking group for those responsible for pensions at charities and not-for-profits.