Some charities are not doing enough to show donors they are tackling the "potentially serious risk" of pension deficits, Sam Younger, chief executive of the Charity Commission, said today.

The Commission said in a report on pensions released today that it will be "engaging with" one charity which has a large pension scheme deficit, but which does not show in its annual report whether it had obtained the financial support it needs to continue or the action it is taking to deal with its deficit. The Commission will not name the charity.

The Commission identified 740 charities with an income over £500,000 whose accounts showed a pension deficit; it randomly selected 97 of these for a more detailed review, and has today published the results of that review.

The review found that only 31 of the 97 charities’ trustee annual reports included an explanation of the financial implications of the charity’s pension scheme deficit and of the trustees’ plans for tackling the issue.

The 97 charities selected report a total pension scheme deficit of over £617m, over half of which was contained within three charitie. These organisations all reported that they are paying additional contributions as part of their plans to clear their deficits. Two of these charities have also closed their scheme to new members.

Further, 60 of the 97 were members of multi-employer schemes, most commonly those provided by local authorities and seven charities had deficits that amount to more than their unrestricted funds and over 20 per cent of their annual income.

Sam Younger, chief executive of the Charity Commission, said: “Pension deficits can pose a potentially serious risk for charities. This report demonstrates that some charities do not adequately explain how they are dealing with their pension deficits in their trustees’ annual report, thereby missing an opportunity to demonstrate to their donors and beneficiaries that they are tackling the problem appropriately.”

The Charity Commission report is part of a new series identifying risks facing charities. 

Analysis in the March issue of Charity Finance finds that the top 40 charities in the UK have a deficit of £5.5bn in their defined benefit pension schemes. A full story will be on the Civil Society Media website tomorrow (9th May).