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Tory peer calls for change in pension law to protect charity assets 2

Finance | Vibeka Mair | 30 Jan 2012

Tory peer Lord Flight has called for charities to be exempt from the Pensions Act 2004 "last man standing rule", in order to protect charity assets from being sold.

The rule recently led to the High Court ruling that a 10,000-piece pottery collection housed in the Wedgwood Museum will be made available to pay off creditors seeking funds for a £134m pension shortfall.

Speaking to civilsociety.co.uk, Lord Flight said it was highly questionable for the last man standing rule to apply to charities and said there should be a change in legislation: 

“I participated in introducing this legislation in 2004,” he said. “And no-one at the time envisaged that the last man standing rule would apply in this situation. It was meant for corporate entities – it had a sound starting base but now it is not being used as intended.”

He continued: “To plunder a charitable museum is outrageous. In a wider context it could be a deterrent to people giving to charity.”

Lord Flight has put the question of exempting charities from 'last man standing' to the House of Lords' main chamber, who will discuss it next month.

Lord Flight also said he was taking up the issue with the Department for Work and Pensions and culture minister Ed Vaizey.

Vaizey recently answered a parliamentary question on the situation with the Wedgwood Museum, and revealed he has held a number of meetings with parliamentarians on the matter.

The Wedgwood Museum has found itself liable for a £134m pension shortfall because of its participation in a multi-employer pension schemecovering a number of employers in the Waterford Wedgwood Group. Five of the Museum’s staff are among the Wedgwood Group pension fund’s 7,000 members.

When the Waterford Wedgwood group fell into administration in 2009, the Museum found itself the last remaining employer in that scheme. Under the Pensions Act 2005, it therefore became liable for a pension debt in the region of £134m.

The administrators had sought advice on whether the Museum’s pottery collection was held in Trust, both the Charity Commission and the High Court ruled it was not, and therefore should be sold off to fund the pension shortfall.

David Davison, a consultant at actuaries Spence and Partners, said it was welcome that the unfortunate situation of the Wedgwood Musuem had highlighted the issue, but he also said it was part of a much wider problem for charities.

"The Museum was connected to its group of companies in its multi-employer scheme. You have cases where a charity goes down, it's within a multi-employer scheme, and its debts are picked up by other charities in the scheme which have no connection to it."

He is calling for a wider pension review, especially section 75 of the Pensions Act, which he says means charities can't leave pension schemes without incurring debts.

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Who's Who: David Davison