The planned merger with Navca and Community Matters, agreed to by members of both organisations, has been cancelled due to fears over pension liabilities.
The organisations were due to have merged in the spring, with both parties' board members voting to proceed. But if the merger were to proceed, one or other would be forced to leave its Pensions Trust scheme and both bodies would have "rising pension debt on withdrawal" they advised in a joint statement this afternoon. Despite having thoroughly investigated all options, they said, the merger cannot proceed.
Joe Irvin, chief executive of Navca expressed his disappointment at the situation: "We have worked hard at these discussions and our trustees saw real benefits in bringing our members together for the benefit of local communities. But though we had overcome most of the obstacles that often prevent merger, we were scuppered by concerns about the rising pension debt.
"This is an escalating problem throughout the sector and something must be done about it," he said.
Both organisations will now continue as separate organisations with Community Matters chairman Alan Lloyd advising that his charity will be undertaking a restructure "to enable us to continue our work as a stand-alone body".
He continued: "Our members are everything to us and we are determined to retain the core advice and information services that they expect from us."
Navca chair, Caroline Schwaller, said of future collaboration with Community Matters: "We will continue supporting our members and speaking up for local voluntary and community action. In doing this there is much scope for us to continue working together in our common causes as friendly sister organisations."
Charities which offer, or offered ‘defined benefit’ pensions linked to the value of their staff's salaries are legally obliged to properly fund their schemes but for many the debts are increasing more quickly than they can afford.
Just last week Navca joined forces with the CFG and NCVO in writing a letter to the Department for Work and Pensions warning on the sometimes "devastating" effects of pensions liabilities.
"Our sector is a committed employer that stands fully behind its existing pension obligations," reads the letter, "However, at a time when finances are already stretched, charities face an increasingly inflexible regulatory environment in the pension sphere.
"Decisions relating to overall scheme funding are taken with extreme caution. While such prudence appears sensible on the surface, the long-term affordability of pension liabilities and deficit recovery plans to the sponsoring charity is given only fleeting consideration. The effects of this can be devastating on the sponsoring employer. This must change for the good of our economy, national well-being and health of our charity sector."
In January Barnardo's announced that it may close its defined benefit pension plan due to pension liabilities of £548m and a shortfall of £83.9m. It's currently consulting with staff on the matter.
>>more to follow<<
More information on how to keep on top of your charity's pension plan is available here.
