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Last updated: November 25, 2012 3:54 am
Justin Welby, a former oil executive, may have hoped to have left the problems of Mammon behind on his appointment as Archbishop of Canterbury, but he could be plunged into an immediate cash crisis.
The Church of England’s pension deficit could reach £500m by the end of this year, putting a huge financial burden on congregations, an independent pensions consultant has warned.
John Ralfe said congregations, who already pay £68m annually to support the Clergy Pensions Scheme’s 24,000 members, will have to find £108m a year if an existing plan to eliminate the deficit over 12 years is not extended.
An updated valuation of the deficit is due to be published by June 2013 at which time the scheme’s board will review measures to address the shortfall. The Church’s pensions board last reported the deficit at £484m in December 2011.
The Church has previously warned that it might have to abandon its defined benefit pension scheme in favour of a hybrid or defined contribution scheme.
But a report by the Archbishops’ Pensions Task Group to the General Synod last week said the Church should “if at all possible avoid further changes to the present benefit structure” following a second round of reductions in clergy pension payments and an increase in the retirement age from 65 to 68 in January 2011.
The Church established its current pension scheme in 1998 following huge losses on property investments in the 1980s and early 1990s. It has a 96 per cent allocation to stocks and other risky assets with just 4 per cent in bonds.
Mr Ralfe argued this approach was “reckless” and that the Church was playing “a desperate game of double or quits”.
“How the Church deals with its pension deficit is about more than money. It is about the Church’s management competence and integrity,” said Mr Ralfe.
However, the Church’s pensions board says its assets have performed well, returning 7.1 per cent annually over the past three years.
“We will continue to monitor investment performance and to work to ensure both security in old age for those who so selflessly serve the Church and a scheme that can be afforded by the Church at large,” the board said.
It argued it was a “young” scheme, even though is already paying out to 13,500 pensioners. The average age of full-time stipendiary diocesan clergy is 52 and one in five are 60 or older.
But it also acknowledged its liabilities, last reported at £1.256bn, have been “extremely volatile” as a result of ultra-low gilt yields.
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