Charity Commission highlights pensions risk after increase in reported deficits

The number of not-for-profit organisations reporting a pensions deficit is rising rapidly, a major study has revealed.

The report, published by the Charity Commission, shows that pensions pose just as much financial risk to charities as they do the private sector.

According to the figures, the number of charities reporting a pensions deficit rose from 740 in 2012 to 1,219 in 2018.

The research also found that most organisations do not report the matter in “enough detail” in their annual accounts and trustees’ annual report, as required or recommended by the Charities’ Statement of Recommended Practice (SORP).

For instance, three in five (58 per cent) charities do not explain the impact of the pension deficit on their financial position in the trustees’ annual report. Alarmingly, just a quarter (26 per cent) of organisations include the pension deficit as a risk, while a similarly low number (28 per cent) explain how they are handling the risk.

Commenting on the report, Nigel Davies, assistant director of accountancy services at the Charity Commission, said charities must be more “transparent” about pensions in their accounts.

“Whilst mindful that reporting can feel like a burden, especially at times like these, it remains really important that charities not only ensure they are taking an active approach to managing significant financial risks like pension deficits, but also that this is reflected and explained transparently in their accounts,” he said.

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Posted in Blog, Charities.