Church of England partners with Prudential to bolster security of pension scheme

Published 11 March 2014  |  
PA

The Church of England has agreed a new £100 million buy-in of the Church Workers Pension Fund to shore up the retirement funds of its 16,400 employees.

This move covers 70 per cent of the personal liabilities of the fund's Defined Benefit Scheme (DBS). This means the pensions provider, Prudential, will make payments into the fund that will match 70 per cent of what the fund pays to church workers enrolled in the DBS.

These pensions are for employees of organisations associated with the mission and ministry of the Church of England, including dioceses, cathedrals and mission agencies.

Pensions of clergy and others in stipendiary ministry are handled by the Church of England Funded Pension Scheme.

Dr Jonathan Spencer, Chairman of the Church of England Pensions Board, said: "The Board is committed to meeting its pension commitments to those who serve the Church.

"We have made excellent returns on our investments in gilts and bonds over the last few years, and are now using these gains to reduce employers' exposure to future risks in the DBS section of the Fund.

"I am delighted that we have been able to secure this agreement with a high quality, long-standing pension provider like Prudential."

Speaking about the implications of the buy in, Dr Spencer said: "The transaction effectively means that just over two-thirds of the pensioner liabilities in the DBS section of the fund are fully hedged."

This decision comes after leading pensions consultant, John Ralfe, said in The Telegraph that the Church of England's pensions were "the riskiest in the country".

Mr Ralfe, who was widely praised for his management of the pension scheme at Boots, claimed that 93 per cent of the Church's pension scheme was invested in shares and other "risky assets".

"I know of a few schemes where the figure is in the 70s or 80s per cent, but I don't know of any others that have more than 90pc of their assets in shares and similar assets," he said. "In 2009 the Church scheme was 100pc in shares, although it has been slowly cutting the exposure in recent years."

He also said the Church of England was "not telling the truth" about the size of the deficit in its pension scheme, which he alleged was £391 million. He pointed to the Church raising its retirement age to 68 and cuts to benefits to manage costs as symptoms of a larger problem.

However a Church of England spokeswoman quoted in the Telegraph disputed both of these figures, putting the deficit figure at £293 million, and suggesting that only 78 per cent of the fund is invested in shares, a number that effectively drops to 73 per cent when certain complex risk mitigating systems are taken into account.

"We do not understand how Mr Ralfe can argue that the Church of England clergy scheme is the riskiest in the country as this is impossible to verify," a Church of England spokeswoman said.

She said at the time that the Church of England's return-seeking assets had "performed well" and that Mr Ralfe had "refused numerous offers by the Church of England Pensions Board to meet to discuss this matter".

Dismissing any suggestions that this recent buy-in was an emergency measure to respond to the kinds of fears raised by Mr Ralfe, the Church of England said: "The buy-in is simply an investment decision to reduce future risks."

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