Nearly a third of charities with final salary schemes (32%) said the size of the pension deficit was greater than their reserves, based on accounting standard FRS17. A further 18% had deficits of more than 50% of their reserves.

But 87% said the introduction of the accounting standard would not restrict their activities. James Smith, director of First Actuarial, said the research had found many charities are now spending as much time focusing on pensions issues as on primary operations.

It found that 43% of charities offered money purchase schemes and 31% final salary schemes, with 26% offering both types. Final salary schemes were more likely to be open in the charity sector as they are an attractive staff recruitment and retention tool.

The findings came as the Board of the Pension Protection Fund published a consultation setting out proposals for the 2007/08 risk based levy, making only minor changes to the existing levy structure.

“The board has been extremely encouraged by the response from industry to the introduction of the risk based levy, and is keen to promote stability to allow the risk based levy regime time to bed down,” said chief executive Partha Dasgupta. “To encourage this stability, and support schemes and their sponsoring employers in implementing risk reduction plans, the board is proposing limited changes to the way the levy is distributed between eligible schemes, focussing on improvements to practical processes.”

These improvements will include revised standard documentation for contingent assets, revised section 179 guidance, and a new approach to the inclusion of insured liabilities within section 179 evaluations.

The board will publish its proposed levy estimate for 2007/08 and changes to the levy scaling factor later this year.