Skip to comments.C of E faces new £36-million pensions squeeze
Posted on 03/04/2006 8:08:14 AM PST by sionnsar
CHURCHGOERS in England will have to increase their giving if the Church is to meet its clergy-pensions commitments, it emerged this week.
The exact sum is unknown; but a taskforce looking at the problem predicts that an extra £18 million to £36 million will be needed if pensions are to remain unchanged.
The alternative would be to reduce future clergy pension entitlements, either by closing the final-stipend scheme to new entrants, reducing future pension benefits for existing clergy, or reducing the size of increases to existing pensioners.
As a consequence of this threat, a new consultation process is being put in train this week. The aim is to reach a decision by the General Synod sessions of February or July 2007, in time to set a new contribution rate for 1 April 2008.
The new crisis comes after a review of the Churchs pensions provision by actuaries which was undertaken to work out the consequences of two government changes. The first is the requirement that pensions-providers calculate their investments and liabilities more cautiously, in an effort to reduce the risk of defaulting. Whereas shares have performed exceptionally well in the past year, the Government now insists that pension funds be valued with reference to bonds, which are safer, but earn less.
The second change is that earlier fund deficits must be made up more quickly than has been the case hitherto. In the Church of England, 4.5 per cent of stipends contributions from the dioceses go to make up a historic shortfall of £91 million, paying this off in 15 years. If, as is expected, the Government requires this to be paid off in ten years, this proportion will have to rise to nine per cent.
At present, 38.8 per cent of the Churchs stipends bill goes towards pensions. All of this comes out of parish giving. (The Church Commissioners pay all pensions liabilities incurred before the end of 1997.) Because of the new requirements, the proportion might have to rise as high as 57 per cent.
In cash terms, this represents an additional annual contribution of £2000-£4000 per cleric. Split nationally, it works out at between an extra 35p and 70p a week for each of the roughly one million churchgoers.
The Pensions Board taskforce comprised Allan Bridgewater, chairman of the Pensions Board; Michael Chamberlain, chairman of the Archbishops Council finance committee; and Andreas Whittam Smith, First Church Estates Commissioner.
The taskforce says it cannot produce precise figures until the triennial valuation of the fund and its liabilities in spring next year. Before then, expectations about bond yields and equity performance might alter the projection. Nevertheless, the taskforce says: "It is highly unlikely that any of these changes will radically change the big picture."
The taskforce also warns that there is little point in looking to the Church Commissioners assets for rescue. In order to fund their commitment to cover all clergy pensions liabilities up to the end of 1997, the Commissioners will spend both the bulk of their income and up to 40 per cent of their capital.
"There can be no solution which does not involve either substantially reducing the costs and therefore the benefits of the pensions scheme, or greatly increasing the expenditure and therefore the giving of the Church, or, indeed, some combination of the two."
Whereas churchgoers are most likely to be concerned about increased contributions, clergy will be anxious about alterations to the existing pensions. Looking at pensions as a whole, more than 70 per cent of final-salary or defined-benefit schemes have been closed to new entrants. The taskforce warns that, because of the relatively low turnover of clergy, this might not make much of an impact.
Other suggestions on the table are reducing the lump sum available on retirement, basing the full pension on 40 years service rather than 37, or increasing the pension age beyond 65.
The taskforce says: "The new situation is not the result of anything the Church has done. The new requirements apply to all such pension schemes, many of which are, as a result, closing or making significant changes."
The taskforces document can be found at
Would you pay to keep clergy pensions at existing rates? Vote here
Pensions review: the key questions
Is the Churchs commitment to the clergy pension scheme in its present form such that it is willing and able to find the additional money to fund it, however high the contribution rate might have to be from April 2008 (or even earlier); or is there an overall cost beyond which it would not be practicable or desirable to go?
What changes in pension entitlement for the future service of existing members of the clergy should be contemplated if some cost reduction proves unavoidable?
Should the present clergy scheme be closed to new entrants, and less expensive pension arrangements be introduced for them?
Should post-retirement pension increases be linked in future to increases in prices rather than in stipends? And should the guaranteed level of increase be RPI up to a maximum of 5 per cent, or, as the law now permits, a maximum of 2.5 per cent?
Without recreating unacceptable liabilities for the Church Commissioners, is there any way in which the assets of the Church Commissioners could help to ease the situation, particularly over the period in which past service deficit has to be cleared?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.