Charities still slow off the mark gearing up to 2012 pension reform
February 2011
According to the latest ACEVO Pensions Survey 2010/11 supported by employee benefit consultants FosterDenovo, nearly half (47 per cent) of charities have not considered their strategy for the 2012 pension reform.
On a more positive note, this figure has decreased from 51 per cent in last year’s survey. The research was conducted among ACEVO members in October 2010, from a population f 349 responses representing 19 per cent of the membership.
The auto-enrolment clock is ticking
Only 35 per cent of charities employing one to nine members of staff have assessed the approach they will take. However, with the 2012 reform, organisations of all sizes will be required to enrol every member of staff on to the scheme, who earns more than the personal income tax threshold, estimated to be £7,475 for the tax year 2012/13. The largest charities will have to begin complying from October 2012
[1].
The survey also highlights that almost one quarter (24 per cent) of those questioned were unaware of what the National Employment Savings Trust (NEST)
[2] pension scheme is.
One key finding indicates the potentially huge cost implications for the third sector. Only half of charities employing 500-999 members of staff currently offer a pension scheme. If the average member of staff earned £20,000 per annum, auto-enrolment could cost £600 per employee, which would equate to an annual spend of £300,000 per year for charities employing 500 members of staff.
Current provision
Although 79 per cent of respondents indicated that they offer some form of employee pension arrangement, take up rates remain low – only 32 per cent of them could confirm that more than 81 per cent of their staff were enrolled on their schemes. So charities do need to take stock and work out the potential cost implication of staff being put into pension schemes via auto enrolment rather that asking if they would like to join.
Ian Bird, principal partner at Foster Denovo, commented: “If your organisation hasn’t already begun planning, then I’d urge you to start the process now, which should include consideration of the potential cost implications. Reviewing the quality and suitability of an existing scheme and implementing a new one isn’t something that will happen overnight.” He also made the point that this requirement to make some form of provision should be added to a charity’s risk register.
Caritas asked Ian for his views on the acceptability to donors of their money going on funding pension provision – particularly some of the large deficits facing providers of final salary schemes
[3]. He take the view that the move to auto-enrolment is helping get the message across that pension provision is not only non-negotiable, but that charities, just like any other organisation, are “ obliged morally and legally to provide decent pensions.” He added: “A lot of people make a career in the sector and might not stay in it if they thought they were going to retire poor.” Ralph Mitchell, ACEVO’s head of policy also made the point that charities do try to offer core benefits to a reasonable level and that donors understood this.
Facts and figures
Additional survey findings included:
• Larger organisations (in terms of turnover) are more likely to have considered strategies for 2012 than smaller organisations. For example: 22 per cent for charities with a turnover of less than £150k, and 71 per cent for those with a turnover of more than £25m.
• 10 per cent of respondents only intend to begin preparing for the reform when contacted by the Pensions Regulator.
• 56 per cent of those surveyed claimed to be unaware of the proposed features, fund choices and charging structure of NEST.
• 83 per cent have not yet started to educate their staff about auto enrolment and pension compulsion.
• 52 per cent of respondents advised that their employees were now more reluctant to save, since the start of the recession. And one third noted the recession has contributed to a lower proportion of staff joining a pension scheme.
• A quarter of charities have closed their final salary schemes to new members in the 12 months prior to the survey.
• 47 percent believe that most of their staff are unaware of the coming changes to the state retirement age.
The ACEVO Pensions Survey 2010/11 is available from ACEVO at £48 for members and £60 for non-members. Contact
jazzmin.farey@acevo.org.uk for further information.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from Cass Business School. She has been one of the judges for the non-profit category of the Chartered Institute of Marketing's Excellence in Marketing Awards for the second year running.
She has also acted as clerk to the trustees of a small almshouses charity and as a member nominated trustee to a pension scheme of a multinational publishing company.
Click here for other articles written by Clarissa Dann
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