Armed forces charity SSAFA faced a £29.2m pension deficit at the end of 2013, equal to half a year’s income, according to its annual report and accounts - but the charity claims the Ministry of Defence is liable for the shortfall.
The charity’s defined benefit pension scheme has assets of £50.8m and liabilities of £80m. However the charity said that under an agreement dating back to 1977, this liability should be met by the MoD. Negotiations over this liability have been going on for a number of years.
A spokesman told Civil Society News that the liability relates to “SSAFA staff providing professional health and welfare services as part of a contract with the MoD” which needs to be disclosed in the charity’s accounts under accounting rules.
“SSAFA is in discussion with MoD to agree a plan to reduce this legacy deficit. Until arrangements are formally agreed, FRS17 dictates that the shortfall is disclosed in SSAFA’s accounts,” he added.
In the accounts it states that: “The trustees accept the legal necessity to include the FRS17 pension liability tin the consolidated statement of financial activities. They do not, however, agree that this liability constitutes a diminution to reserves because in their view this liability should be reimbursed by the MoD in accordance with an agreement dated 25 February 1977.”
An MoD spokesman said: “The Ministry of Defence is currently discussing with SSAFA the funding of their pension liabilities, following a historic agreement dating back to the 1970s which reflects a particular relationship between the charity and department.”
SSAFA’s pension deficit stems from its participation in the London Pension Fund Authority multi-employer scheme, which has an overall deficit of £483m. According the latest accounts the charity has 232 active members.
Earlier this year the scheme notified employers that it had introduced a new set of criteria to reflect members’ risk and debt that saw some members’ contributions double. SSAFA’s contribution to the LPFA scheme increased from 23.9 per cent to 25 per cent.
SSAFA’s total income for 2013 was £58.2m, up from £50.4m the year before. Spending in 2013 amounted to £50.5m, meaning SSAFA ended the year with a surplus of £7.7m.
SSAFA employed an average of 760 people last year, with 56 people were earning more than 60,000. The charity said many of these were medical personnel taken on from the Ministry of Defence under NHS contracts.
One employee earned up to £120,000.
The charity was previously known as SSAFA Forces Help following a merger, but has now rebranded and is known only as SSAFA.
