The Scottish Voluntary Sector Pension Scheme (SVSPS) is to close to new money from next April, forcing 140 organisations ranging from small housing associations to the Scottish Youth Hostel Association to look for alternative pension arrangements for more than 2500 employees.

Jonathan Black, a pensions expert with CPRM in Edinburgh, said: “Many Scottish organisations are seriously concerned by the planned closure, which may have significant financial and staffing issues and, in pensions terms, the planned closure date of April 2010 is just around the corner.”

Like other schemes, the SVSPS has been hit by increasing life expectancy, tightening legislation, and poor recent investment performance.

But a key issue is that the scheme is run by the Pensions Trust on a “last man standing” basis, Black said, a model used by only a few UK industries including the local garage trade and the Merchant Navy.

“This means that, where any participating organisation closes down and cannot meet all of its liabilities in full, those liabilities need to be picked up by the remaining participants. There are serious concerns about the implications of participants having to keep a close eye on the financial strengths of one another.”

Tim Hencher, director of finance and resources at the Scottish Council for Voluntary Organisations, said: “SCVO has taken on an advisory and supportive role with our members and the wider sector.

“We recognise the importance of supporting the scheme’s member organisations through this difficult change.”

Black added: “One of the huge issues is that many of these organisations are very weak and there is a big concern that many of the more robust organisations have been putting in some good money after bad.”

The SCVO warned last month that the financial crisis had created a “perfect storm” of reduced public funding, less corporate sponsorship and lower structural support from Europe for the sector.

Associate director Stephen Maxwell added that pensions faced the biggest impact. “Over the last two years many voluntary organisations have adapted to falling investment returns and rising longevity by reducing benefits or increasing payments by employer or employee or both.

“But compared to the private sector a surprising number have stuck to final benefit schemes.”

He added: “Traditionally the sector has compensated for inadequate public funding by using donated income or reserves or by paying lower wages or pensions to their staff.

“But subsidising public income with charitable income will be impossible when all the main sources of voluntary sector income, with the possible exception of charity shops, are in decline. Then the only option left will be to find extra savings from staff costs. Life’s just got a lot tougher for the voluntary sector.”

Black is advising some organisations on transferring to the SME Centralised Pension Scheme, managed by Independent Trustee Services, a multi-employer framework of stand-alone schemes.