Legacy Defined Benefit Pension Schemes

The trustees of the NSPCC's defined benefit scheme have secured the pensions of the scheme's existing pensioners by transferring those liabilities to the Pension Insurance Corporation for a price of £63 million. Buying out the pensioners with a life office has the benefit for the scheme and the NSPCC of removing a sizeable element of pension risk from both of them, although it is likely that the price charged by PIC will have fully reflected that risk. The NSPCC scheme closed to the future accrual of benefits in 2009, since when the scheme has been in long-term run off with a view to winding it up when its funding position permits this to be done. The third sector is in the same position as the private sector in having to manage and pay for legacy defined benefit schemes.

NSPCC is not alone in facing the challenges posed by its defined benefit scheme. It is reported that Barnado's intends to close its scheme to future accrual in consequence of a deficit of £83.9 million.

The above highlights the importance of carrying out pensions due diligence before entering into any merger with another charity to avoid unwittingly acquiring a death benefits scheme.

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