Iain McSeveny, head of finance at Amnesty International, has warned that small charities in specialist sector pension scheme Growth Plan 3 risk getting caught out by unforeseen liabilities, as pensions minister Steve Webb writes to him about the issue.
 
Last month, McSeveny wrote to Webb asking him to remove the threat to Growth Plan 3 pension scheme members of becoming liable for large  pension debts in Growth Plans 1 and 2. The Pensions Trust runs Growth Plans 1,2 and 3.

Previously the Pensions Trust’s Growth Plan 3 was considered a “money purchase” or defined contribution scheme but following a court case, the Department for Work and Pensions (DWP) has ruled that where it is possible for a deficit to arise in a scheme, that scheme cannot be regarded as “money purchase”.  The DWP will introduce retrospective legislation to reflect this.
 
This means that Growth Plan 3 could be reclassified as a defined-benefit scheme. McSeveny said. “The provisions in the Pensions Act 2011 will result in Growth Plan 3 being reclassified as a defined-benefit scheme, and subject to awaited regulations, make Growth Plan 3 members jointly and severally liable for all liabilities in series 1 and 2.”
 
He continued that it was not “reasonable or equitable” for charities in Growth Plan 3 to be burdened with historic pension liabilities of Growth Plans 1 and 2.
 
In a letter responding to McSeveny’s concerns, the pensions minister Webb said he was aware of the situation and said there would be an ongoing consultation on the issue, including clarifying the definition of money purchase schemes.
 
McSeveny, along with the Charity Finance Group has already met Webb, and said he seemed to be taking a “thoughtful and reasoned” approach to the issue.
 
McSeveny added that the potential of liabilities for members of Growth Plan 3 were especially of great concern to small charities who wouldn’t have sufficient unrestricted reserves to meet this unexpected cost.
 
He also warned that the issue was probably not on some small charities radar yet. “They may not have the resources to track the issue.”

The Pensions Trust Growth Plan pensions schemes have around 1,700 charities members.

Because of liabilities in the Growth Plan, Community Matters and Navca were forced to abandon a merger earlier this year. Had the merger gone ahead, one or other of the charities would have been forced to leave the scheme, which would have left them with large pension debts.