Skills for Logistics, a sector skills council charity, was driven into liquidation by its pension scheme with the loss of 34 jobs, and more charities are likely to follow unless pension law is reformed, the Charity Finance Group warned this week.

Skills for Logistics was one of 18 sector skills councils in the UK. On 25 February it went into liquidation, owing more than £2m to its pension fund and a little over £300,000 to all other creditors. It blamed a “significant pension deficit and subsequent ongoing recovery payments” and said that matters had been made worse when the trustees of its pension scheme adopted a new approach.

The Charity Finance Group highlighted the case in its response to a government call for evidence on “section 75” debt – rules which govern how organisations in multi-employer pension schemes are treated when the last employee in the scheme leaves or retires.

At present, several thousand charities are enrolled in multi-employer schemes to provide defined benefit pensions to their employees. Charities often cannot afford to remain in these schemes, but the current section 75 rules mean that if they try to leave, they will have to pay an unaffordable lump sum up front.

CFG made its comments in response to a Department for Work and Pensions call for evidence, Section 75 Employer Debt in Non-Associated Multi-Employer Defined Benefit Pension Schemes, which outlines several options for charities to leave these schemes without triggering this section 75 debt.

One option in the DWP consultation suggests that you should be allowed to withdraw all members from the scheme - effectively "freezing" the scheme, meaning you do not have to continue to make payments - without triggering a S75 debt. This would mean you do not have to continue to make payments for future benefits but would agree a future funding plan with the trustees.

Another option is that you should be allowed to negotiate an individual exit plan with the employer. A third involves potentially revaluing how debts are calculated when an employer leaves the scheme.

CFG has said its priority is to adopt the first proposal to “freeze” the scheme. It said that once that happened, employers must also be allowed to implement the second proposal to negotiate a flexible repayment plan.

CFG also called on the government to reform local government pension schemes. These do not technically have to follow the same rules as multi-employer schemes, but often do so.

“One thing we want to make clear is that something needs to be done about this now,” Andrew O’Brien, head of policy and public affairs at CFG, said today.

“This is just a call for evidence, not a formal consultation, and we can’t allow the government to kick this into the long grass.”