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Synod votes to tweak defined-benefits plan

by
01 March 2007

Clergy pensions

“A fair package”: Bishop John Packer introducing the debate on pensions

“A fair package”: Bishop John Packer introducing the debate on pensions

THE SYNOD has endorsed the continuance of a defined-benefits pension scheme for the clergy, but with various changes to make it more affordable to the Church.

These include requiring 40 rather than 37 years’ service for the clergy to be eligible for a full pension; and reducing the limit on price indexation in the funded scheme from five per cent to 3.5 per cent p.a. in relation to future service. The full recommendations are in the report, The Future of Clergy Pensions.

The Bishop of Ripon & Leeds, the Rt Revd John Packer, described the matters before the Synod as urgent, since the Pensions Board must, in the autumn, set the level of contribution to be paid into the pension scheme for the next three years. Unless action is taken immediately to modify the benefits of the scheme, the new contribution-rate would put dioceses under further financial pressure, which few could sustain.

Until December 2006, the rate was 33.8 per cent, or £6105 per stipendiary cleric. From April 2008, it was likely to be about 43.5 per cent, or £7856, unless action were taken. The consultation made it clear that this was unsustainable. The Bishop believed that the package struck a fair balance between security for the clergy and the need for affordability in the Church. The impact of the proposed change would be set out in the consultation, and members would have 60 days to respond.

The secretary and chief executive of the Church of England Pensions Board, Shaun Farrell, gave the Synod a presentation on the current and proposed pension scheme. Figures for 2005 in the C of E showed full-service pension at £11,686 p.a., and state pension at £4132: a total of £15,818. It put clergy in the top 20 per cent of retirement incomes, but there was a need to provide housing. Three options had been given to the dioceses, of which the preferred one was Option A: to retain the defined-benefit scheme, but to modify it.

The recommended package retained the defined-benefit scheme; increased full-service accrual to 40 years; broke the link between stipends and pensions; set LPI (Limited Price Indexation) guarantee at RPI up to 3.5 per cent; distributed an extra £4.4 million on a per-capita basis initially for a transitional period; and included carrying out a full review of retirement-housing provision.

Introducing the debate on his motion, Bishop Packer said that the package presented was fair. Clergy were prepared to take on some part of the pain caused by the statutory requirement for greater prudence in pension-scheme funding, less buoyant investment returns, and clerics’ increasing longevity.

Canon John Ashe (Guildford) was seeking, in an amendment, to maintain the link between pensions and any increases in the national minimum stipend. The debate switched between those who wanted to ensure that the money for pensions was available, and those who wanted to keep faith with past promises as a priority.

Timothy Allen (Ipswich) warned that the Synod’s desire, at the end of the 20th century, to increase clergy stipends without finding the means to do so had led the Church Commissioners to more lucrative but also riskier investment strategies, which had led to the “irretrievable” loss of capital. The Commissioners continued to use capital to pay for pensions. He warned that if the Synod now promised more than dioceses could afford, there would be no way out.

The Revd Dr John Hartley (Bradford) quoted Jesus’s parable in Luke 14.28, of calculating the cost of building a tower before beginning, and said that the principal cost of building would have been wages and pensions. A defined-benefits scheme, such as was now enjoyed by the clergy, did not allow a definite calculation of the costs to the Church of the scheme.

The Revd Dr John Hartley (Bradford) quoted Jesus’s parable in Luke 14.28, of calculating the cost of building a tower before beginning, and said that the principal cost of building would have been wages and pensions. A defined-benefits scheme, such as was now enjoyed by the clergy, did not allow a definite calculation of the costs to the Church of the scheme.

Simon Baynes (St Albans) said that many people were “sleepwalking to an impoverished retirement”. He wanted to ensure that the clergy did not join them.

Linda Jones (Liverpool) said that when her husband had been training for ministry in 1983, they were advised to sell their house, as they would be provided for in their retirement. “We sold our house in Walthamstow after seven years of mortgage for £24,000. You may join me in weeping.” She asked for a questionnaire to be included with the consultation about pensions, so as to discover the scale of the problem of housing clergy in retirement.

Canon Clive Hawkins (Winchester) said that dioceses should be asked to make an increase of between 42 and 43 per cent in the pensions’ contribution to maintain the link with stipends.

Canon Ashe, moving his amendment, appealed to people to trust God. The Church should cut its coat according to its cloth, but: “The subtext is: we are asking our retired clergy to live in thinner coats in order to release money for mission.” Did the Synod want so easily to give the message that the retired clergy were no longer part of the mission of the Church?

Dr David Tweedie (Coventry) said that defined-contributions schemes were for the benefit of shareholders. “Ours should be for the benefit of our pensioners.”

The Archdeacon of Dorchester, the Ven. Norman Russell (Oxford), called for the Commissioners to make a cash injection into the diocesan pension funds, which would reduce their commitment.

The Archdeacon of Birmingham, the Ven. Hayward Osborne (Birmingham), said that the numbers of clergy needed should be decided on the basis of the resources and the needs of the Church’s mission, rather than on the present “haphazard” system.

The Bishop of Worcester, Dr Peter Selby, said that only actuaries could make an “improved clergy mortality experience” sound like bad news. “Making the needs of the retired compete with missionary expenditure is profoundly unedifying.” He could not agree with the Bishop of Ripon & Leeds that pensions were holding back stipends.

Michael Chamberlain (Archbishops’ Council) rejected Archdeacon Russell’s suggestion that it was biased towards the views of the diocesan boards of finance. Out of 43 dioceses, 40 said that to contribute more than 40 per cent towards pensions would be “unsustainable”. Maintaining the defined-benefits scheme was the greatest challenge, and might not be possible if the “parameters” sought by the Board were exceeded.

Graham Smith (Gloucester) warned: “How can we ask those in our pews to hand over cash to support something that they in their wildest dreams cannot aspire to?”

Canon Simon Killwick (Oxford) said that tied housing, which did not allow clergy to benefit from house-price inflation, was a net cost, not a net benefit. Rather than using the Commissioners’ money to support mission, “Fresh Expressions should be financed by fresh money, not paid for in the same old tired way by the Church.”

Dr Christina Baxter (Southwell & Nottingham) said that the Church was not addressing “the larger questions”, which were the need to address the level of giving, and the need to pray about finances.

Dr Jackie Butcher (Sheffield) recalled a priest saying that he was the only person in his congregation who was not living on benefits. There were still many parishes where that was so, and where nobody else was a house-owner.

Allan Bridgewater, the chairman of the Pensions Board, said that it didn’t really matter what the Synod decided, “provided you can show to us you have the wherewithal to go through with your decisions”.

Dr Sentamu warned that the Board’s whole package was one that “gives confidence that we can will the means. Tinker with it, and we have a really confused package.”

Tim Hind (Bath & Wells) said that a defined-contributions scheme would put an enormous burden on charitable giving to support clergy in reduced circumstances. The laity had not been adequately consulted. Perhaps they would have been prepared to fund pensions to maintain the present system.

The Bishop of St Albans, the Rt Revd Christopher Herbert, said that clergy had become relatively poorer over the past 40 years, and the Synod was now saying that retired clergy should become relatively poorer in comparison to the relatively poor clergy.

Canon Ashe’s amendment was put to the vote, and lost.

The Bishop of Durham, Dr Tom Wright, said that there were many dioceses and parishes where, if retired clergy did not work so hard: “The entire show would grind to a halt.” He was already embarrassed by the gap between what stipendiary and retired clergy received.

April Alexander (Southwark) raised the position of those not yet ordained. The solution for many schemes in other walks of life was to close them to new members. There was a huge risk, if the proposals were not accepted, of this happening to a group that was already having to pay for the benefits of its older colleagues.

The Revd Stephen Trott (Peterborough) said that most of the clergy were “financial innocents”. He made a plea for the proposals to be provisional. Increasing the retirement age to 68 would meet the regulators’ requirement.

The Revd Jonathan Alderton-Ford (St Edmundsbury & Ipswich) said that, in his rural parish, only four or five people earned more than the incumbent. Yet the PCC had been enthusiastic in discussing how to meet costs.

The Bishop of Worcester’s amendment was lost.

The Bishop of Chichester, the Rt Revd John Hind, wanted a wider debate on the gospel principle of mutuality, in a situation where poorer parishes were subsidising richer parishes in their dioceses.

Brian Newey (Oxford) urged support for the motion as put. Housing was a major issue: the Synod should rely on the Bishop of Ripon & Leeds and the Deployment Remuneration and Conditions of Service Committee to supply proposals.

An amendment from Canon Killwick was lost, and the Synod voted to endorse the recommendations in paragraph 69 of the report The Future of Clergy Pensions, subject to the necessary statutory and other consultations that the Archbishops’ Council now needed to conduct; and to invite the Archbishops’ Council to submit to the Synod in July final proposals, including such changes as were necessary to the funded-scheme rules.

An amendment from Canon Killwick was lost, and the Synod voted to endorse the recommendations in paragraph 69 of the report The Future of Clergy Pensions, subject to the necessary statutory and other consultations that the Archbishops’ Council now needed to conduct; and to invite the Archbishops’ Council to submit to the Synod in July final proposals, including such changes as were necessary to the funded-scheme rules.

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