The Church Times has a report today by Bill Bowder: Dioceses asked to find £10m to shore up pensions
The letter referred to in the article can be found on the Church of England web site linked from this page.
WARNING the .rtf file there is (at present) 4.3 Megabytes in size. [file size now fixed] You may find it more convenient to read the letter below the fold here.
The Church of England Pensions Board 29 Great Smith Street, London SW1P 3PS
To: All Responsible Bodies
Church of England Funded Pension Scheme
Dear Sir/Madam
Clergy Pensions Scheme
At its meeting on 28 February the Board received and considered the report Clergy Pensions – The Challenge Facing the Church – produced by the Task Group commissioned by the Archbishops. Copies of the report can be accessed via the Church of England website at www.cofe.anglican.org.
The report included an annual update on the financial position of the scheme from the Board’s actuary. He indicated that as a result of reduced investment returns, increasing life expectancy and most recently new government scheme funding regulations, there is a strong likelihood that the formal valuation of the scheme (due to take place as at 31 December 2006) will reveal the need for a substantial uplift in the contribution rate. Following the timetable used in previous years, the results of the formal valuation would be discussed in the course of 2007 with any change to the contribution rate taking effect from 1 April 2008.
At its meeting on 28 February the Board registered its concerns about the emerging situation and the possibility that, in the light of the information now available, it would have to give serious consideration to seeking an interim increase in the contribution rate pending the outcome of the formal valuation and the current discussions taking place to consider the future structure of the scheme.
The Board met yesterday to consider the position again in light of recent consultations including the special meeting of the Inter-Diocesan Finance Forum which took place on 27 March.
It has become clear that, based on the actuary’s latest advice, insufficient funds are now coming into the scheme to meet future pension obligations. The Board concluded therefore, that it would neither be acting responsibly nor in the best interests of the scheme’s members if it were to leave the contribution rate unchanged until 2008. It therefore decided that the contribution rate would need to rise, on an interim basis, by 6% to 39.8% with effect from 1 January 2007. This equates to a standard annual contribution of £ 7,188 per clergy person (an increase of £1,083 over the current rate). The rate payable in the longer term will be reviewed in the light of the formal valuation of the scheme next year and the progress made in the interim period to determine the future benefits structure.
With regard to the latter, further meetings with representatives of the Pensions Regulator are taking place to assess precisely how the new scheme funding regulations will apply to the clergy scheme and the Task Group is aiming to produce its second report by mid June. This is likely to include for consideration, specific propositions relating to the future of the scheme including the scope for the potential use of the Church Commissioners capital resources, in partnership with the rest of the Church, to support the funding plan (recognising that any involvement would come at some cost in terms of their overall support for the Church).
We envisage that responsible bodies will be invited to respond to that report by the end of the year so that recommendations can be made to General Synod in the course of 2007 (ideally in February).
I know that this letter will come as unwelcome news but I wanted you to be aware of the situation as quickly as possible. I trust that you will understand why the Board decided that it had to take this action.
If you have any questions about this letter or the current process do please let me know.
Yours sincerely
M G S Farrell
Secretary & Chief Executive
The Church of England Pensions Board