Many charities have staff in multi-employer pensions schemes offering a defined benefit pension which guarantees the level of income that employees in the scheme will receive when they retire. Existing rules mean that if a charity withdraws from the scheme, perhaps because their last active member retired or they can no longer afford to remain in the scheme.
That event of the employer leaving the scheme triggers a one off large payment to the pension scheme, known as a section 75 cessation fee, that is unaffordable for many charities. After many years of campaigning there are two pieces of legislation that have recently come into effect.
The occupational pension schemes (employer debt and miscellaneous amendments) regulations 2018
From 6 April 2018 the Government has introduced new measures whereby employers whose only change is to cease to employ active members in a scheme, can opt to use a Deferred Debt Arrangement (DDA) to defer the requirement to pay the cessation debt, so long as they retain all their previous responsibilities to the scheme, including making deficit contributions on an ongoing basis.
Local government pensions scheme (Scotland) regulations 2018
Some charities will also be affected by the Local Government Pension Scheme (Scotland) Regulations 2018 which come into force on 1 June 2018 and offer a similar option for charities participating in LGPS by use of a suspension agreement negotiated between the LGPS Fund and the charity.
It is yet to be seen to what extent the pension schemes will embrace these changes or not but, in theory, both are welcome changes for charities.
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