UK – The Pensions Trust has warned that the Pension Protection Fund and the new FRS17 accounting standard could “completely strangle DB provision in the charitable sector”.
Stephen Nichols, deputy chief executive at the £2.5bn (€3.6bn) trust told IPE: “With single employer schemes, both the PPF and the accounting standard FRS17 should be reviewed immediately before they completely strangle DB provision in the charitable sector.”
The trust runs multi-employer occupational pension schemes.
Speaking of the coverage that the PPF would offer to charities’ pension funds, Nichols said: “It is unclear what level of cover will be given to the thousands of charities in multi-employer schemes, if any.”
“This is because we believe that payment from the PPF will only be triggered once all these employers become insolvent. A very poor benefit for a potentially exorbitant premium.”
He also told IPE that new charities would be prevented from joining defined benefit multi-employer schemes, due to poor credit ratings.
“We believe that at the very least there should be a special case for multi-employer schemes,” he suggested.
The Pensions Trust provides 37 schemes covering over 4,000 charities, including Oxfam, with investment services.
The schemes have access to a global equity fund, which employs four managers, with a passively managed currency overlay, a fixed interest fund (three managers) and an index-linked fund (two managers).
These funds have risk budgets ranging from a “low risk/passive management investment approach” to a “higher risk/more aggressive investment approach,” Nichols said.
In addition schemes have access to a directly invested property fund and ‘dark green’ and ‘light green’ ethical funds.
“While some of our schemes will change their investment strategy in order to reduce their risked-based levy, we do not envisage any change to our overall investment structure,” Nichol said, adding there might be some “small realignments from manager to manager”.
The PPF’s spokesman Paul Reynolds told IPE that in its proposals for the introduction of the risk based levy , published last week, the agency has suggested a risk-levy cap in response to the concern expressed by the industry.
“ We are aware of these concerns and that is why we are proposing this cap. We very much welcome the industry’s response,” Reynolds said.
Comments on the proposals are requested by 4 October.