Charities are being driven out of business by pension schemes, CFG tells DWP

Skills for Logistics, a sector skills council charity, was driven into liquidation by its pension scheme with the loss of 34 jobs, and more charities are likely to follow unless pension law is reformed, the Charity Finance Group warned this week.

Skills for Logistics was one of 18 sector skills councils in the UK. On 25 February it went into liquidation, owing more than £2m to its pension fund and a little over £300,000 to all other creditors. It blamed a “significant pension deficit and subsequent ongoing recovery payments” and said that matters had been made worse when the trustees of its pension scheme adopted a new approach.

The Charity Finance Group highlighted the case in its response to a government call for evidence on “section 75” debt – rules which govern how organisations in multi-employer pension schemes are treated when the last employee in the scheme leaves or retires.

At present, several thousand charities are enrolled in multi-employer schemes to provide defined benefit pensions to their employees. Charities often cannot afford to remain in these schemes, but the current section 75 rules mean that if they try to leave, they will have to pay an unaffordable lump sum up front.

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