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Pensions Board replies over alleged hole in its fund
by Bill Bowder
%231%23.jpg) Taking a dive: a man walks past a screen showing stock prices on the London Stock Exchange on Tuesday. World markets mostly fell amid renewed concern about the banking sector AP |
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CHURCH OF ENGLAND officials came out fighting this week after the Financial Times reported that the clergy pension scheme faced serious shortfalls. The whole of its Ł461-million investment fund had been put into equities, the paper reported. A pensions consultant, John Ralfe, told the newspaper on Tuesday that the Church had consistently underestimated the cost of the pensions scheme. “The Commissioners must be hoping to make good by betting on equities” to fill the Ł352-million gap between the pension fund’s assets and its liabilities, he said. The Commissioners had assumed that the value of shares in the pension fund would increase at a rate of four per cent above inflation to fill the gap. Using that assumption, they had handed out more money to the dioceses to support the rest of the Church’s work. On Wednesday, the chairman of the Pensions Board, Dr Jonathan Spencer, rejecting the charge, said that the fund’s main liabilities were “some way in the future”. “It is not at all unusual or unduly risky to place the majority of the scheme’s funds in the investment instruments which historically have produced the best returns in the long term,” he said. “We are not gambling with [parishioners’] donations. Similarly, clergy should be reassured that we are assessing a range of options . . . to help ensure that our obligations to them will be met.” The fund is now diversified, with 80 per cent equities, and ten per cent corporate bonds. The borad had taken actuarial advice from the start. The consultation by the Pensions Task Group established by the Archbishops had taken place “in part” because of the 30-per-cent fall in general share prices last year, a church spokesman said. The Task Group proposed that, in future, clergy would have to retire later, while accepting smaller pensions, because parishes and dioceses could not afford to pay more. To fill the gap between the fund’s investments and its deficit and commitments, dioceses and parishes could find themselves having to pay an extra 57 per cent above the current costs of a stipend. That was not affordable without “damaging reductions in other items of expenditure, including . . . the number of clergy posts.” The Task Group said that it was unrealistic to expect contributions towards pensions to exceed 42 per cent of stipends. To meet the shortfall, it suggested modifying the existing defined-benefit pension scheme, or moving to a defined-contribution scheme for all future service, or a hybrid of the two. Irrespective of which scheme was chosen, future pensions would not be linked to stipend increases, but to the retail price index (RPI). Pensionable age would increase to 68 and it would take 43 years to earn a full pension; clergy would contract into the State Second Pension. Clergy should not expect their stipends to increase faster than the RPI. Results from the consultation will be put to the Archbishops’ Council, and a “package of proposals” will be put to the General Synod at its next meeting, in February. |
