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Pensions Board accused of ‘immoral’ loans

04 April 2014

Mr Quin in his study at the vicarage of St Ippolyt's, Hitchin

Mr Quin in his study at the vicarage of St Ippolyt's, Hitchin

THE daughter of a 92-year-old priest who is paying interest on a loan agreed with the Church of England Pensions Board at 8.6 per cent - more than twice the cur-rent average - has questioned the morality of the scheme.

In 1985, the Revd Eric Quin took out a shared-equity loan in order to purchase a three-bedroom cottage in Cheshire for £45,750. With his wife, he paid £20,750 to put down a 45-per-cent deposit. The Pensions Board paid the remainder, £26,500, on the understanding that it would be entitled to 55 per cent of the final sale price.

The initial interest rate was three per cent - much lower than the 12-per-cent mortgage rate at the time. This rate was gradually increased in line with the pensions of all the fund's members. Mr Quin is now paying interest at a rate of 8.6 per cent. The property has risen in value to £200,000.

Although the family now stand to gain £90,000 if the property is sold, they will have paid an estimated £50,000 in interest, in addition to the £20,750 deposit, leaving them with a profit of £19,250 (21 per cent). The Pensions Board, on the other hand, will have made a profit of £84,500 - 319 per cent.

As advised by the Pensions Board, Mr Quin took legal advice before agreeing to the loan.

Last month, Mr Quin's daughter, Rosemary Lea, who originally expressed her concerns in an interview with the Daily Mail, said that she had been "horrified" to learn of the terms of the loan, which she discovered after being given power of attorney 18 months ago. "I'm sure it's legal, but it is immoral and unethical."

She also criticised the lack of communication from the Pensions Board. "If there had been a letter every year, a statement, then as a family he could have paid off the loan and equity . . . We could have got together and sorted that out."

The shared-equity scheme, which opened in January 1983, was closed in 2008 in response to changes in the tax rules which would have extended the potential tax liability on "beneficial loans" in a way that could have affected retired clergy.

Mrs Lea believes that the 970 households still in the scheme are "a forgotten band of people". Those administering the scheme had been "very slow to respond" to her first enquiries, before claiming that a reply had accidentally not been posted. She and her sister went to the Daily Mail, after warning the Pensions Board that they would feel it necessary to make their story public unless they were able to see their father's file or to obtain "some satisfaction about the paperwork". Two months passed with no response.

On Wednesday, a spokesperson for the Board said: "We have written to Mrs Lea on a number of occasions, providing copies of the relevant papers as requested; it is not clear what further 'satisfaction about the paperwork' Mrs Lea is seeking but we would be pleased to discuss that with her."

On Tuesday, Bernadette Kenny, the chief executive of the Pensions Board, said that the scheme had been introduced in order to enable clergy nearing retirement to obtain a mortgage in recognition of the fact that they were unlikely to be able to get a commercial one.

"We were trying to protect these clergy, as far as possible, from the effects of the then-prevailing interest rates," she said. "This was a period when rates were changing every month, and could be as high as almost 16 per cent. . . We wanted to give them certainty about how much interest they would be paying every year."

The rate of interest was set by reference to the increase in clergy pensions, broadly in line with the Retail Price Index. Miss Kenny calculates roughly that those clergy who joined the scheme in the mid-1980s have paid, on average, interest at six per cent over the lifetime of the loan, which is slightly lower than the average base rate. "At certain points they would have been paying very significantly below the prevailing rate," she said.

Since the publication of Mr Quin's story in the Daily Mail, other retired clergy have expressed concerns about the cost of housing, and, in particular, the interest rates set by the Pensions Board.

The Board currently helps 2600 retired clergy and their dependants, mostly through its rental scheme, which covers 1200 households. A consultation was launched last year to address what the Board described as the "inequities" of this scheme. It does not, however, address the shared-equity scheme joined by Mr Quin, or the shared-ownership scheme that succeeded it in 2008: these will be considered at a later date, the Board says.

On Tuesday, Miss Kenny said that the extent to which it would be possible to change the shared-equity scheme, which was "based on mutual legal obligations", was "limited". The Pensions Board would, however, start to issue mortgage-style statements later this year.

The results of the consultation and the Board's response will be published at the General Synod in York in July.

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