LGPS negotiations prevent insolvency of 300 charities
Hundreds of charities and quasi-public sector organisations have been saved by last-ditch extensions of up to 30 years to their deficit repayment plans.
The amount non-council organisations in the Local Government Pension Scheme (LGPS) must pay into the plan have skyrocketed, due to investment underperformance of 10% over the past decade and increased longevity projections.
And 25% government budget cuts for local authorities means this debt increase, which must be repaid within a finite period, has put around 300 organisations at risk of bankruptcy.
Currently the timeframe for repayment is as short as two years for some bodies, but negotiations between them, the LGPS, trustees, actuaries and lawyers have resulted in others being given up to 30 years to clear the debt.
Pinsent Masons, Atkin & Co and covenant consultants Jackal Advisory have clubbed together to construct a better deal for charities than pension insurance indemnities – the only way participating LGPS members can currently extend their repayment periods.
Barry McKay, actuary at Hymans Robertson, claimed the LGPS was willing to renegotiate repayment periods for charities in particular, because of the political nature of them.
“If they go bust, it makes the LGPS look bad,” he said. “However the LGPS can’t wait too long for the money as it needs to protect the others in the fund. They shouldn’t allow repayment periods of much more than 20 years.”
John Hanratty, head of public sector pensions at Pinsent Masons, said the largest repayment period extensions will be granted to the companies with the “most dire” financial situations.
“Charities are really being squeezed at the moment, because donations are one of the first things people pull the plug on in a recession,” he added.
Over the next month, Pinsent Masons, Atkin & Co and Jackal Advisory will send out a survey to the organisations in question to ascertain how much longer they need to make
payments.
Investment underperformance of 10% over the past decade and increased longevity projections has seen the amount non-council organisations in the Local Government Pension Scheme (LGPS) must pay into the plan skyrocket.
And 25% government budget cuts for local authorities means this debt increase, which must be repaid within a finite period, has come at a particularly tough time, putting around 300 organisations at risk.
Currently the timeframe for repayment is as short as two years for some bodies, but negotiations between them, the LGPS, trustees, actuaries and lawyers has now bought many of them up to 30 years to clear the debt.
Pinsent Masons, Atkin & Co and covenant consultants Jackal Advisory have clubbed together to construct a better deal for the charities than pension insurance indemnities – the only way participating LGPS companies can currently extend their repayment periods.
Barry McKay, actuary at Hymans Robertson claimed the LGPS was willing to renegotiate repayment periods for charities in particular, because of the political nature of them.
“If they go bust, it makes the LGPS look bad,” he said. “However the LGPS can’t wait too long for the money as it needs to protect the others in the fund. They shouldn’t allow repayment periods of much more than 20 years.”
John Hanratty, head of public sector pensions at Pinsent Masons said the largest repayment period extensions will be granted to the companies with the “most dire” financial situations.
“Charities are really being squeezed at the moment, because donations are one of the first things people pull the plug on in a recession,” he added.
Pinsent Masons, Atkin & Co and Jackal Advisory will send out a survey to the companies in question over the next month to ascertain how much longer they need to make payments.
