Church faces pensions crisis

A LOOMING pensions crisis in the church could mean congregations in Suffolk will be asked to give as much as £600,000 more a year.The action may need to be taken to curb a deficit in the church's budget for its final salary pensions, which it says are essential for retiring vicars.

A LOOMING pensions crisis in the church could mean congregations in Suffolk will be asked to give as much as £600,000 more a year.

The action may need to be taken to curb a deficit in the church's budget for its final salary pensions, which it says are essential for retiring vicars.

With the pressures of people living longer and lower investment returns, the Church of England could become the latest casualty of Government changes to pensions legislation.

One of the options it is being forced to consider is to close final salary schemes to new members if the money cannot be raised locally from the collection plate.


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The move comes only a week after the EADT reported that congregations had dug deep to stave off another financial crisis in the church.

A budget shortfall, which sparked fears of a vicar recruitment freeze in Suffolk, was reduced after worshippers gave a record £5.1million.

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Nick Clarke, spokesman for the Diocese of St Edmundsbury and Ipswich, said yesterday : “It's extremely disappointing that, because of changes by the Government which the church has no control of whatsoever, Suffolk's churchgoers will be facing a potentially massively increased requirement to ensure the clergy pensions are paid in full from this point forward.”

Vicars are given a house, along with support for bills and council tax, as part of their pay package, while their actual salary is relatively low - around £19,000 a year.

But Mr Clarke explained: “The downside is that they are quite dependent on final salary schemes to help them buy a house when they retire.”

The church in Suffolk currently has a total budget of just under £7million, with nearly £905,000 set aside for pensions.

Nicholas Edgell, chief executive officer of the diocese, is expected to tell the diocesan synod - the church's 'parliament' - today : “Based upon the most recent figures provided by the Actuary, the present contribution rate of 33.8% will rise to perhaps 46% or even 57%, should the pension regulator require the existing deficit to be cleared in not more than ten years.

“Converting percentages into pounds focuses the mind. The Church of England will need to find additional payments of between £18m and £36m per year.

“To focus the mind still further, the recent press release stated that 'these costs will need to be met by the dioceses from contributions made by parishes'. In our diocese, I calculate that this will amount to £300-600,000 per annum.”

The clergy pensions scheme, like nearly all such schemes, has been in the red in recent years as a result of increased longevity and lower investment returns.

In 2003, it had a deficit of £91million accumulated since January 1, 1998. The Church of England had planned to fund this shortfall by additional contributions over 15 years, which would have been acceptable under the previous arrangements.

But since the Pensions Act 2004 came into force, the way in which funding schemes have to calculate their assets and liabilities has “radically changed”.

A report from the church's pensions task group said: “The decisions that the Church of England now faces are not merely complex but of great importance, touching as they do on the way in which the church supports its clergy, and indeed its lay staff, both before and in retirement.”

A six-month consultation with dioceses on the pension review will start some time after Easter.

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