Friday, 10 March 2006

CofE pensions crisis: more coverage

Some press reports of the recent announcements:

Church Times last week had: C of E faces new £36-million pensions squeeze

Church of England Newspaper this week has a feature article by Bishop John Packer Facing up to the pensions crisis.

The Church of England website has, in addition to the documents linked here previously has more items:

An article designed for parish magazines, which can be downloaded as an RTF file, or read here below the fold.

The Powerpoint slides used at the General Synod presentation in February can be downloaded.

You can listen to the audio recording of that presentation here.

If you want to know more about how the clergy pension scheme works from the member’s viewpoint, you need to download as a PDF the booklet Your Pension Questions Answered . Other material is available from the links on the right hand side of this page.

Article for use by parish magazines

By Shaun Farrell, Secretary, the Church of England Pensions Board

In common with private companies and public bodies, the Church of England is reviewing its pensions policy. No decisions have been taken and none will be taken until the General Synod debates them and that will not be before next year.

Like all other defined benefit pension schemes, the Church’s pension schemes are under pressure. They are being squeezed because of the long-term reduction in returns from investments, and the increasing life expectancy of members. On top of that, new Government regulations designed to make pension schemes more secure for their members are also likely to increase the cost of the Church’s schemes.

The new regulations and code of practice result from the Pensions Act 2004 and substantially change the way in which schemes have to assess their assets and liabilities. They require pensions funds to take a more cautious view of likely investment returns and to adopt an investment policy that attempts to reduce risk still further. They also stipulate that deficits in pensions funds should be made good more quickly than before.

The Archbishops of Canterbury and York set up a task group to look at the impact on pensions. Its report sets out the issues facing the Church and starts a wide consultation ahead of any decisions. The report is published in full on the Church of England’s website,, with a link, Pensions update, to all the relevant documents.

The key questions tabled by the task group were:

  • Is the Church’s 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 future contribution rate might have to be, 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 increases in pensions be linked in future to increases in prices rather than in stipends (as they are at present)? Without recreating unacceptable commitments for the Church Commissioners, is there any way in which their assets could help to ease the situation, particularly over the period in which past service deficit has to be cleared?

The report, which has been circulated to a wide range of church bodies, foresees a six-month consultation process within dioceses starting some time after Easter and a report to General Synod on options in February 2007. The consultation comes in advance of the statutory three-yearly valuation of the clergy pensions scheme as at December 2006.

* Parochial clergy are currently paid an annual stipend of around £19,000 and have the use of a house provided by the Church. The current pension, payable at 65 to those with 37 years’ full-time service, is £11,686, plus a lump sum of three times the pension on retirement. Retired clergy provide their own accommodation, while the Pensions Board provides some assistance for those with limited resources.

Posted by Simon Sarmiento on Friday, 10 March 2006 at 11:35pm GMT
You can make a Permalink to this if you like
Categorised as: Church of England

The current full CofE pension is already hardly over-generous:- According to the CofE pension folk, if you include a full UK state pension, a (married) priest gets about 19000 pounds per year, and an Archbishop about 30000. So I don't see how this could be reduced without causing hardship - which is against the principle of the stipend. Similarly the idea of defined cost pensions (putting the risk on the priest) would be against the "stipend" principle.

So the only honourable way to avoid further huge cost increases to the churches would be later retirement. Assuming good health in old age, and increased life expectancy, I think that is a perfectly reasonable and honourable answer.

Posted by: Dave on Saturday, 11 March 2006 at 3:12pm GMT

Dave suggests later retirement as a response to the pensions shortfall for the C of E. There are two difficulties with that route; one financial the other pastoral.

Most institutions would save by going for later retirement because it would not affect the total number of employees. However the church has a longstanding practice of sustaining as many stipendiary ministers as offer. Later retirement would add to costs because it would mean clergy who would otherwise have been in receipt of a pension at about £13K being in receipt of a stipend, housing and pension contribution package over £30K. My roughest calculation would suggest an increase in 2 years would add around £7.5M to the total costs, equivalent to around £800 per clergy post. The only way to save through this would be if the later retirement age were simply a proxy for basing the full service pension on a greater number of years of service, and hence reducing the actual level of pension for most clergy. Which defaults to the solution Dave rejects in his first paragraph.

The second problem is pastoral. The demands on clergy have increased hugely in the last thirty years or so, not least as numbers of stipendiaries have dropped. There are no gentle posts left for those who wish to move quietly towards retirement. Some are actually going a little before 65 already through stress. To put financial pressure on such individuals is iniquitous. And if the result of increasing the offical pension age is that a high proportion leave in advance the potential savings have been wiped out anyway.

Posted by: David Walker on Sunday, 12 March 2006 at 7:57am GMT

Dear David, I certainly agree that raising the pension age means that more people may have to retire early on health grounds (physical/mental/emotional) - hence I said "assuming good health".

However I disagree that it is unfair that a priest gets the same pension having worked for more years. Of course it is unfair if you focus only on the interests of the priest, but there are other considerations in the church.

Regarding the outcome of having more working clergy (and related employment costs) I understand that half the clergy of the CofE are heading for retirement on the next 15 years, and ordinands in training are about half the replacement rate. So if nothing changes the church's employment costs are going to drop by about 25% in real terms over the next 15 years. Put the other way round, we could raise the normal retirement age to 70 (ie same as Bishops) progressively between 2010 and 2020 and still have slightly falling employment costs!

Personally I would prefer that (with health guarantees) to being told I would receive a lower pension (or no guaranteed pension at all) or loading the churches with even higher pension contributions.

Posted by: Dave on Saturday, 18 March 2006 at 8:42pm GMT

A further thought... An increase in retirement age will, I suggest, be unhelpful from both the perspective of mission and church life. Already the average age profile of clergy is too high to effectively reach the younger generations, though I know that there are individual exceptions to this.

Also, faced with another five years of ministry, any thinking person - hopefully clergy are that - who has been in ministry a decent amount of time, would start to pace themselves more and thus outlay less time and energy on their work. Most would still be working well within their job description so little could be done practically, but the result would be a less energetic and involved leadership, though again there would be individual exceptions. This, of course, in addition to any who, by that stage, had burnt our or retired through ill health.

Posted by: mike newman on Tuesday, 12 September 2006 at 5:31pm BST
Post a comment

Remember personal info?

Please note that comments are limited to 400 words. Comments that are longer than 400 words will not be approved.

Cookies are used to remember your personal information between visits to the site. This information is stored on your computer and used to refill the text boxes on your next visit. Any cookie is deleted if you select 'No'. By ticking 'Yes' you agree to this use of a cookie by this site. No third-party cookies are used, and cookies are not used for analytical, advertising, or other purposes.