News – £17m shortfall in Arts Councils pension fund

The size of the black hole in the main pension scheme for employees of the arts councils of England, Wales and Scotland has been revealed in recently published documents issued by the National Audit Office. The pension scheme, called the Arts Council Retirement Plan (1994), is a defined benefit scheme (also known as a final salary scheme) which was originally operated by the Arts Council of Great Britain. The value of the fund is independently audited every three years and the most recent valuation, in April 2005, has uncovered a deficit of £17.1m. New legislation to protect employees rights requires the individual arts councils to take steps to reduce this deficit from this year so that payments to retiring staff will not be affected in the future.
The shortfall has prompted different responses from the arts councils. While Arts Council England and the Scottish Arts Council have chosen to significantly increase their employer contributions to the scheme to 23.5% and 25.4% respectively, the Arts Council of Wales (ACW) has made a one-off payment of £1.35m in a bid to fill its share of the black hole. £600,000 of this payment came from Lottery funds enabling ACW to maintain its employer contributions at 18.8%. ACW also changed the terms of its pension scheme, requiring new employees to make larger contributions. An ACW spokesperson said, We used a one-off payment to clear part of the deficit because this was more cost-effective than our paying it off over many years. The more costly alternative would have been for ACW to pay increased employer contributions over the next 12 years& ACW and the other employers in the scheme are seeking to preserve employees benefits. In a statement, an official for the Department for Culture Media and Sport said, The National Lottery Act allows distributing bodies to draw money from the National Lottery Distribution Fund to defray the administrative expenses incurred in undertaking its Lottery distribution activities. This would include relevant staff-related costs.