The Church of England has published a paper on the impact of the credit crunch and recession on the financial position of the Funded Clergy Pension Scheme and what this might mean for the future of the scheme.
The last actuarial valuation of the scheme, carried out as at 31 December 2006, revealed a deficit of £141m. This is currently being eliminated by way of extra contributions paid by the employers participating in the scheme, in addition to the contributions required to pay for future benefits. Some modifications were also made to the scheme in 2007 to help contain costs. (See notes to editors).
The Church of England Pensions Board is the trustee and administrator of the Funded Clergy Pension Scheme, which covers the pension benefits earned by Church of England clergy from 1 January 1998. All pension benefits relating to service before 1 January 1998 are met by the Church Commissioners. The scheme, in total, has around 9,000 active members and 13,000 pensioners.
In keeping with all other pension schemes, in between the formal triennial valuations, the Board receives an annual update on its financial position from its actuaries which it shares with the sponsoring employers. The Pensions Board will consider this update at its meeting next month.
Shaun Farrell, Secretary and Chief Executive of the Pensions Board, explained:
“Like all pension schemes, we face a challenging situation, following the fall in general share prices of around 30 per cent during 2008 and the fall in yields on government securities which are used to calculate pension fund liabilities. It was therefore sadly inevitable that the deficit on the scheme would have risen significantly. The Board’s actuaries have now confirmed that this is the case. If conditions remain unchanged at the end of 2009 when the next formal valuation of the scheme takes place, we would be facing a significant increase in the contribution rate.
“However, we are already looking at options for the Church to consider in a planned and methodical way. In November, following an early warning that the end of year figure would raise concerns, the Archbishops of Canterbury and York asked the Task Group that undertook a review of the scheme in 2005/2006, to re-form to evaluate the situation and explore the options for the future. Today, the group is publishing a paper that sets the scene for the Church to begin considering the way ahead.”
The Task Group comprises the Chairman of the Pensions Board (Dr Jonathan Spencer), the First Church Estates Commissioner (Andreas Whittam Smith) and the Chairman of the Archbishops’ Council’s Finance Committee (Andrew Britton) assisted by the Chief Officers of the three organisations and the Chief of Staff at Lambeth Palace. Their initial paper is available via the Church of England website at www.cofe.anglican.org/info/pensions2009.
The Pensions Board is monitoring the situation closely and intends to decide by June whether any interim increase in the contribution rate is required before the results of the next triennial valuation become available in Spring 2010.