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Court to hear plea against pension scheme deficit payment

Governance | Tania Mason | 17 Mar 2010

A court case scheduled for tomorrow will be asked to consider whether a charity pension scheme liability is more important than the charity’s responsibilities to its beneficiaries, and ultimately its survival.

The Hirwaun YMCA in South Wales owes £18,200 to the YMCA Pension Plan Trustee, as its share of the £29.7m shortfall being paid back over the next ten years by the 126 YMCA member charities of the scheme.  Two of the Hirwaun branch’s former employees had joined the scheme when they worked there and when the last employee left the charity in 2006, a Section 75 debt was triggered, totalling £18,200.

Because the charity is unincorporated, its trustees are liable under law for the debt.

The Pension Plan says it has attempted to convince the  chair of the charity, 72-year-old Colin Shaw, to agree methods of settling the debt but after nearly three years of fruitless negotiations, it felt obliged to issue a statutory demand to claim the sum owed.

In response Shaw, who with his wife Avril has been involved with the Hirwaun branch of the YMCA in a voluntary capacity for almost 30 years, has asked the local insolvency court for the statutory demand to be "set aside", claiming the charity will be bankrupted if it is forced to sell its clubhouse to pay the debt.

It is this request that will be heard by the Aberdare County Court tomorrow.

Charity 'can't afford to pay'

Speaking to Civil Society, Shaw confirmed that the branch had had two employees that paid into the YMCA pension scheme, and that the charity made contributions too. The first employee left in 1981 and the second in 2006.

The charity was made aware after the second employee quit that there was a deficit in the pension scheme and that the charity would be required to stump up a share of that deficit.

But, he said, recently the branch has found it difficult to keep afloat even without trying to find an extra £18,200, so Shaw told the pension scheme trustees that it wouldn’t be able to pay.

Pension scheme 'duty-bound to collect the debt'

Paul Smillie, company secretary for the YMCA Pension Plan, said Shaw had been offered a payment plan and two other YMCA branches had also offered him a loan to cover the debt.  When he refused to accept these, the pension trustees had no option but to “crystallise events by issuing a statutory demand”.

“We are duty-bound to collect the debt,” Smillie said. “We’ve been trying to negotiate with him for nearly three years.”

Smillie explained that because the charity was unincorporated – that is, it has no legal entity – the law obliged the pension scheme to send the statutory order to one of the committee members.  “It is not a personal action against Mr Shaw,” he said. “But under the law this is the action we have to follow.”

'This will be the end of the charity'

Shaw said he didn’t believe the pension scheme was genuinely trying to force him to sell his own assets to fund the debt, but was hoping to scare him into agreeing to sell the clubhouse owned by the charity.

“If we do pay this upfront it will mean us selling the clubhouse, and then that will be the end of the club,” he said. “Three hundred young people and 100 adults use this building every week, it’s their parents and grandparents that built it.

“We are being cast in the role of villains but the fact is we can’t afford this money. I can’t deny we had members in the pension scheme but I am not happy with the way it’s been run.

“If they want us to sell the building they can come here and tell the 300 young people why. I don't think the way they are behaving is very Christian.”

‘Greater responsibility to beneficiaries than to staff’

Shaw said he was “caught between the devil and deep blue sea”.

“Of course I don’t want the former staff to lose their pensions but I believe we have a greater responsibility to the people of the village than to the pensions scheme.”

Shaw admitted the pension trustees offered him a payment plan of £100 a month for ten years, but because this would only raise £12,000 he was convinced the demands would increase once he signed up to it, so he rejected the offer.

Smillie said there was no precedent for the court setting aside the statutory demand.  “It’s the first time ever in the history of the YMCA pension scheme that we have had an application of this type,” he said.  “And the pension scheme has been running since the 1960s.”

YMCA England making payments to plug the shortfall

A spokeswoman for YMCA England said that it has agreed to pay roughly £700,000 a year to the scheme for the next ten years in order to plug its share of the shortfall.

• Read David Davison’s blog about this story

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