David Davison warns that those who are part of the Pensions Trust's 'Growth Plan' need to watch out for unexpected consequences.

There’s a trustworthy man who appears regularly on television promoting the merits of a well-known wood stain with the line “It does exactly what it says on the tin”.  Unfortunately my recent experience with a pension scheme called the Growth Plan from the Pensions Trust has been far from as clear-cut.

There are a number of versions of the Growth Plan. Many of the charities who participate are blissfully unaware that a number of these potentially expose them to the risk of toxic final salary-related benefits when they thought they were funding purely on a defined contribution basis. There is therefore the potential for participants to have built up sizeable deficits within their scheme when they were unaware that this was the basis of the arrangement and that the payment of these deficits could be triggered inadvertently.  Such triggers could include the organisation participating changing status, such as incorporation or merger, or if there were to be no longer any active members participating.

Participants need to be sure which version of the Growth Plan they participate in and if there are any additional liabilities which are building up and if so of what amount. The level of debt applicable is generally smaller than that which has built up in other, more high-profile schemes; however it can still be material for organisations, particularly those working within tight budgets.

You need to make sure your pension plan "does exactly what it says on the tin"!!