Many charities participate in LGPS and this participation presents them with challenging funding issues which they need to address. It has always been challenging to identify the quantum of these liabilities across the UK and to identify the financial impact the pensions in these schemes have on the operation of the sector.
In this report we have collated information from publicly available charity accounts from 2021 to seek to provide some insight for the sector and the charities involved.
We identified 676 organisations participating in LGPS however, that was filtered down to 208 where full financial and FRS102 pension disclosures were included in the charity accounts. The key findings were:-
- The accounts were compiled by well over 100 different audit firms. A huge array of accounting design and terminology was used within the disclosures.
- The estimated funding position on an on-going basis suggested that overall the 208 employers were fully funded on this basis. However, the funding rate fell to 79% on an FRS basis with a deficit of around £1Bn and 69% on a cessation basis with the deficit rising to around £1.8Bn.
- The sector could potentially have total liabilities in excess of £15Bn and a cessation deficit in excess of £5Bn.
- The cessation deficit of £1.8Bn represents around 22% of adjusted total reserves but 63% of unrestricted reserves and around 39% of total income.
- Employer contributions represent around 33% of movement in net funds while the accruing cessation liability would represent around 60% to 75%.
- Updating the results to end November 2022 saw the cessation deficit fall from the £1.8Bn figure to around £200m. This presents a huge opportunity for charities considering their future participation in LGPS.
The full research report is available here.