Charity and Not-For-Profit

Schemes with sponsors in the Charity / Not-For-Profit sector, and the sponsors themselves, need to balance the fundamental non-profitable aims of the sponsor with the funding requirements of the scheme.

This tension between non-profitable aims and scheme funding is the key dynamic in the schemes’ funding negotiations and the setting of a journey plan to a long-term funding target (“LTFT”).

The requirement for a formal, long-term funding and investment strategy has been introduced by the Pension Schemes Act 2021 and is expected to be further detailed in the Pensions Regulator’s updated Funding Code of Practice, expected in late 2022 or early 2023.

We help trustees and sponsors to have robust, collaborative and transparent conversations to reach consensus on long-term funding plans. We also have significant experience in advising on creative covenant-enhancing solutions.

Our approach

The employer covenant in these circumstances is rarely ‘strong’ given the nature of the sponsor’s aims. As such, the affordability of contributions to the scheme is key – the assessment of which must take into account the sector’s unique characteristics. We therefore look at:

  • the ability of the sponsor to attract income, generate cash flow and fund competing claims (identifying which competing claims are a i) priority, ii) discretionary, iii) commercial or iv) political; and,
  • the availability and quality of sponsor assets.

Our advice provides a clear input into triennial funding discussions and long-term journey planning.



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