A recent article in The Independent has warned that most charities are technically insolvent. Can this be true? From reading it I fear ‘yes’.

It argues that the 2p reduction in the standard rate of tax (and subsequent loss of Gift Aid repayments) is the least of the worries for the third sector. The big threat is from pensions: successive government actions to protect pensioners, stock market turbulence and lower interest rates have all conspired to generate huge deficits in pension schemes.

There seem to be two options for filling this black hole. Firstly that charity workers – for the sake of the viability of the institution they have committed their working life to – accept lower (affordable) pensions. The second is that donations will have to be siphoned off to pay for the pension-fund deficits.

Neither option is particularly attractive, but to save the third sector one or other approach will have to be adopted.

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