Business

An unholy pension hole

  • 21 January 2014
  • From the section Business
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The Archbishop of Canterbury Justin Welby

The Archbishop of Canterbury, who has taken upon himself the role of scourge of big opaque banks and profiteering payday loan companies, is today accused of ignoring a financial sleight of hand on his own doorstep.

John Ralfe, who would be seen by many as the bane of allegedly reckless pension funds, has written to Archbishop Welby to warn him that the deficit of the Clergy Pension Scheme may have been seriously understated.

Ralfe also complains that he was refused access to the data, and had to obtain it through a backdoor route, which he says is "not a good example of the Church's transparency and openness".

Black hole

The Clergy Pension Scheme has 16,400 members, including 5,800 pensioners, and its latest valuation showed a £293m deficit, which seems big, but was only modestly higher than the £263m deficit of 2009.

Ralfe points out that the increase in the scheme's hole would have been much higher - to a substantial £391m - if it had not been for a jump in the discount rate used for calculating the scheme's liabilities.

The important point is that the higher the discount rate, the smaller the liabilities. And the Clergy Pension Scheme increased this rate by 0.5% without - according to Ralfe - giving an explanation for why this was appropriate.

Cash-strapped

Ralfe calculates that if the deficit had been recognised at that higher £391m, cash-strapped dioceses and parishes would be forced to shell out £90m a year to provide vicars and other church officers with pensions, compared with the 2012 outlay of £69.4m.

He complains that at the synod in November, there was no discussion of the pension hole, because the official view was that the deficit had hardly increased and contributions would therefore rise by less than £3m.

Ralfe says: "If this £21m a year increase had been tabled at the Synod, it seems likely dioceses would have pushed to close the scheme... The Archbishops' advisory group reported in 2010 that only 18 of the 42 dioceses supported sticking with DB [final salary] pensions".