THE Church of England Pensions Board expects a valuation carried out this year to declare its scheme for clergy pensions fully funded for the first time since its inception.
The Church of England Funded Pensions Scheme (CEFPS), which provides pensions for clergy and others in ministry for service, has been in deficit at each valuation since it was created in 1998. This was the year in which the Church Commissioners — who retain responsibility for clergy pensions earned in service until the end of 1997 — transferred the pensions burden to dioceses.
The deficit was expected to take many years to fall, as the Church Commissioners were reluctant to draw down money to cover it, citing intergenerational equity (News, 13 July 2007).
The CEFPS is funded by contributions from the dioceses and other participating responsible bodies (such as theological colleges), and the current rate is set at 39.9 per cent of the previous year’s national minimum stipend. The contributions are then invested by the Pensions Board.
A valuation of the scheme in 2015 put the deficit at £236 million, but, by 2018, this had been cut to £50 million. In 2020, the Board indicated that once the remaining small deficit was closed — expected by 2023 — the contribution rate from dioceses would be cut (News, 24 January 2020). This remains the case.
The latest annual report speaks of a “strong investment performance over the last three years”, and says that the Board’s investments total almost £3.7 billion across all schemes, after a return of 13 per cent in 2021, compared with an average over the past five years of 8.7 per cent.
But it warns: “As we look to the year ahead, the near-term outlook for the global economy and markets is uncertain. The recent recovery has been fuelled by an increase in government debt which, along with supply chain issues, has led to an increase in inflation and upward pressure on interest rates.”
After the 1998 changes, giving in parishes had to increase to cover the cost of clergy stipends and pensions, as the percentage covered by the Church Commissioners fell. Strong returns reported by the Commissioners, together with strained diocesan finances (two-thirds are operating on deficit budgets: the cost of providing stipendiary ministers with a stipend, pension, and housing makes up most of the expenditure), have prompted calls from some for this change to be reversed.
The Pensions Board’s annual report notes that the Covid-19 pandemic has caused “changes to retirement patterns”. A spokeswoman from the Pensions Board said this week that some clergy had deferred their retirement in the early stages of the pandemic, possibly to stay with their parishes during the crisis.
Others, however, had approached the Board to discuss early retirement. The two factors together suggested that there might be a short-term increase in the number of people retiring in the next year or two, she said.