Now this is absolutely fascinating

And we\’re not being told the half of it.

Hundreds of homeless people with mental illness, addiction and debt problems are being left to cope without vital support services after a leading charity was forced into insolvency by its pensions liabilities.

We get told about all those being left without services: a tragic tale indeed. What we don\’t really get told is what actually happened about the pensions.

Experts said charities at high risk of going bust included those dependent on public funding, or which have inherited expensive pensions liabilities after taking over the running of public sector services, including social care, leisure centre facilities, housing and academy schools.

Does anyone know what this really means?

But after a write-down in the value of its assets, it found itself with a £17m pension liability. It presented a solution to the Pensions Trust, which operated its pension scheme, that it said would have allowed it to meet its obligations while continuing as a going concern, but this was rejected, pushing it into administration.

There\’s a much bigger financial story behind this I\’m sure. Why is it that a charity is facing such huge pensions liabilities?

A number of possibilities occur off the top of my head.

1) They were promising themselves too high a pension all along.

2) By taking on staff \”outsourced\” from the public sector they had to take on public sector pension liabilities.

3) Brown\’s rules in how pensions must be accounted for have made previously viable promises unviable.

I have a feeling, reading between the lines, that it was 2. But that in itself is an interesting story: for it rather calls into question those public sector pensions themselves, doesn\’t it?

So, anyone know more detail?

11 thoughts on “Now this is absolutely fascinating”

  1. They only registered as a Charity in 2011 and have submitted no accounts. No info from Companies House – refers readers to the FSA. Further info available from the Grauniad – this is a recycled story, they published it a month ago – stating that it got into trouble in 2007-9 when it spent the money it obtained by selling hostels to St Mungo’s on an Arts Centre instead of the homelessness hostel that it had said it would refurbish with the cash.
    If early editions of the Grauniad are to be believed, Pensions are the last straw not the main cause.

  2. My guess would be (2). I have friend who works for a mental health charity. I say charity because thats what it says on the paperwork. In practice it seems more like an arm of local government. And currently all the provision of ‘mental health services’ is being put out to tender for anyone (including commercial organisations) to take over these contracts. So the charity is having to bid to do the work it has been doing for years, and prove it will provide ‘value for money’ etc.

    So one assumes if this is all this work is being contractualised and put out to tender, there will be employees who have to be taken on under TUPE and pension rights inherited from the local authority/NHS.

  3. Funny old charity which depends for funding on bidding for council contracts for services ranging over handicap, mental health, perps and victims of domestic violence, eating disorders and ex-cons.
    Maybe some ‘orrible capitalists like Serco or Capita could do the jobs better and cheaper?

  4. Pension rights aren’t normally subject to TUPE so rather than inheriting, the charities would have had to agree to take on the liability. The only exception to this relates to early retirement and enhanced payouts due to redundancy (check out Beckmann rights for more details).

  5. Maybe some ‘orrible capitalists like Serco or Capita could do the jobs better and cheaper?

    Serco, possibly, although I’d not like to bet on it. A couple of trained monkeys with a staff of leaf ants could do the job (any job) better than Capita.

  6. The rot goes back a long way. In the 1980’s when many pension funds were in surplus, rather than allow the companies to take pension holidays, the funds were forced to increase benefits. Of course, that sort of change only goes one way…

  7. Nick, are you sure about that? I remember a lot of pension holidays in the ’80s.

    The problem here is probably not company pension schemes but public sector ones being dumped onto the private sector.

    And the reason public sector pension schemes became unaffordable was poor public sector accounting – the government could grant pension rights but leave the bill for the next generation.

  8. Charity – what a truly abused word.

    There’s an epidemic of self serving quango hopper ticks gorging themselves on what were once clear cut public assets which have now been magicked into not for profit, charity, NHS etc. etc.

    The monumental self regard of these folk has Linked in and other social media chock full of their jargon laden cvs.

    Herd them over the fiscal cliff.

  9. I’ve done a few bids for tenders with various local charities. Forces the organisation concerned to show its value for money, to show it has robust processes, to show it can make a defined difference (not a wishy washy we think people are better off but saying exactly how, and backing up with verifiable evidence).
    Raises the game.

    Not won many, cost still being a big part of any bid and small charities not having the resources of larger organisations. One charity turned out to have too many staff involved in the project, it needed just 4 they had 12 plus a manager, so considerable efficiency savings possible.

Leave a Reply

Your email address will not be published. Required fields are marked *