Opinion

Protection from pensions

Finance | Daniel Phelan | 26 Mar 2010

Daniel Phelan ponders the implications of the pensions timebomb.

While the Catholic Church is using the courts to confirm its god-given right to pursue its homophobic doctrines, it is also the courts that are likely to be asked to determine who will take the blast when another more home-made time bomb explodes.

Pension shortfalls are becoming a major issue for some charities as the negative effects of poor investment returns are compounded by ever-extending life expectancies. Trustees who have tried to do the right thing by their staff are now finding that  the liability this has created is looming up to swallow them whole, lock stock and clubhouse.

In some circumstances individual trustees of unincorporated associations are being asked  to find large sums as a result of section 75 demands triggered by circumstances beyond their control. The sums involved are arbitrary, calculated as they are by a set  of assumptions that could be very significantly wrong in either direction. Nonetheless, they are invariably large and beyond the pockets of most individuals.

And charities with limited liability are little better off. How  long will the public continue to give generously when they discover that their donations may be going to make up seemingly endless pension scheme shortfalls?

Inevitably, there will be calls on the courts to balance the rights of future charity beneficiaries against current pension liabilities. This is going to be painful in some instances as difficult choices are made. And it may lead to much more fundraising for restricted purposes so that the funds cannot  be siphoned off to meet pension  fund demands – exactly the opposite of what most charities would like.

Daniel Phelan is editor-in-chief of Civil Society Media 

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