UK - Charities may be able to hoard pension surpluses in years of good returns by setting up a fund that is exempt from Inland Revenue caps, actuaries believe.
The concept – which is being researched by Hymans Robertson – would allow charitable organisations to put excess pensions cash in a tax exempt fund. This could then be used to supplement the fund in times of stock market volatility.
Hymans Robertson head of actuarial practice Ross Russell said the measure could help protect charitable organisations and their pension schemes during steep stock market falls.
The move comes at a critical time for charities, many of which are buckling under the strain of pension costs.
Mercer Human Resource Consulting partner Matthew Demwell recognised the problems that charities face but stopped short of backing the concept of tax-exempt funds for surplus.
He believes the funds would fall under the remit of a trading fund not a charitable one.
Last year it was revealed major supporters of charities were becoming increasingly concerned that their donations were being used to meet pension fund deficits.
Experts believe these concerns triggered a surge in DB scheme wind-ups and a move towards industry-wide schemes.
Latest figures from the Charity Fund Partnership suggest that only 31% of charities have their own pension scheme while 24% are part of an industry-wide scheme.
Demwell said charities had to “think long and hard” about what costs their donors are paying.
“What donors don’t want to see is that falling stock markets are sucking in more and more of their money that could be used on charity cases.”
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