Charities in England and Wales face increased pension deficits that will exacerbate existing financial struggles they are experiencing as a result of the COVID-19 pandemic, a report from Hymans Robertson said.
In the analysis of the 40 largest charities in England and Wales by income, the average funding ratio of their defined benefit plans is 92%, and the average pension deficit is 15% of unrestricted reserves. Ten of the 40 charities have a funding surplus, according to the report.
With three-quarters of charities experiencing a funding ratio of less than 100%, and fundraising and retail income hit hard by the financial difficulties arising from the pandemic, the report says charities should suspend contributions.
In March, the Pensions Regulator published guidance acknowledging that suspending contributions may be appropriate for some defined benefit plans in this moment, the report said.
"The COVID-19 pandemic has placed many charities under significant financial strain with fundraising and retail income particularly badly hit and with a need to conserve cash," said Alistair Russell Smith, head of corporate DB at Hymans Robertson, in a news release. "In many cases there is additional concern as DB pension deficits have also increased. On top of this, there is extra worry for pension schemes in the sector as forthcoming regulatory changes are putting pressure on charities to pay off pension deficits quicker."
The report is available on Hymans Robertson's website. Hymans Robertson officials could not be immediately reached for further information.