THE clergy pension will be restored to two-thirds of pensionable stipend, at a cost of £900 million, if proposals published yesterday by the Archbishops’ Council are approved by the General Synod.
The proposed changes, which follow extensive campaigning by clergy (News, 14 March), would benefit both existing and future pensioners. Those who have already retired would see a pension increase reflecting a two-thirds accrual rate since 2011. If adopted in full — including the proposed uplift to the national minimum stipend (NMS) — the proposals would provide a full clergy pension after 40 years of service of more than £20,000 a year in today’s money, which, together with a full state pension, would give an income in retirement of more than £32,000 per year.
The cost — about £900 million in cash terms, paid out over the lifetime of the current scheme membership — will be funded entirely by the pension scheme itself, reflecting recent strong investment performance and more favourable market conditions. No net cost to dioceses is expected.
The proposals follow a review of clergy stipends and pensions requested by the Synod last year (News, 1 March 2024). The motion — carried unanimously — called on the Archbishops’ Council, the Pensions Board, and the Church Commissioners to “work together with dioceses to explore ways in which the level of clergy pensions and stipends might be improved in a sustainable manner”. This was an amendment to a private member’s motion from the Revd Dr Ian Paul, which called for the restoration of the clergy pension to its pre-2011 benefit level “as soon as possible”.
In 2011, the level of pensions benefit was reduced from two-thirds of the NMS to half. The length of service which it takes to build up a full pension under the scheme was increased to 41.5 years from 40, and the normal pension age was increased to 68 from 65 (News, 16 July 2010). Under the new proposals, length of service will return to 40 years.
Dr Paul, a member of the Archbishops’ Council, has welcomed the package as “the fruit of many years of campaigning”, which “puts right a serious injustice”.
Another Archbishops’ Council member, the Archdeacon of Liverpool, the Ven. Dr Miranda Threlfall-Holmes, said: “Nobody is in ministry for the pay, but the covenant the Church makes with clergy is that they should be freed by the stipend from financial stress. In recent years this covenant has been straining at the seams, and thousands of clergy have been asking for the restoration of the historic two-thirds pension, which this package now effectively provides.
“I hope they feel heard today, and I pray that Synod will approve these proposals whole-heartedly in July, so that we can begin to increase pensions already in payment as soon as is possible.”
The package represents a significant shift from the October 2023 response of the Archbishops’ Council’s Secretary General, William Nye, to Dr Paul’s motion. This cited the conclusion of the Clergy Remuneration Review, published in 2021, that “the current level of pension (when combined with the state pension) is adequate” (News, 25 June 2021).
Mr Nye also mentioned the size of diocesan deficits as a factor affecting the affordability of implementing Dr Paul’s request. While the pension scheme before 1998 was an unfunded scheme, whose liabilities were met by the Church Commissioners, the Church of England Funded Pensions Scheme (CEFPS) is funded by contributions from the dioceses and other participating responsible bodies, such as theological colleges.
Mr Nye warned that increasing benefits in respect of all service since 2011 would require specialist legal and actuarial advice, estimated to cost at least £100,000, and would take “years” to implement because of their complexity.
A Pensions Board paper at the time warned that retrospective changes would be “highly complicated, and may have unintended consequences”, including the potential for personal tax liabilities for members.
The chair of the Archbishops’ Council’s Finance Committee, Carl Hughes, an accountant by training, said that Mr Nye had been “right to be cautious”. But, since the debate, the triennial actuarial valuation of the scheme had been carried out, underlining that the Pensions Board had done a “superb job” of managing the scheme’s assets, Mr Hughes said, and had exceeded his expectations.
A new paper from the Pensions Board recalls “serious challenges” in the scheme in the aftermath of the Global Financial Crisis of 2008 and subsequent years of “ultra-low interest rates” and gilt yields “well below historic norms”, increasing the estimated cost of meeting pension promises.
But circumstances are now “more favourable”, it says. Most importantly, the funding deficit in the CEFPS was eliminated from January 2023, as a result of strong investment performance (eight per cent on average over the past 20 years), support from dioceses, and changes in market conditions (News, 18 February 2022). The scheme had been in deficit at each valuation since its creation in 1998. The rate of contributions asked of dioceses has fallen from 40 per cent to 22 per cent of pensionable stipends.
The new proposals will require changes to the scheme rules, which will be put to the Synod in July, with potential implementation after April 2026.
They will form part of a wider package put forward in the wake of the Diocesan Finances Review. Proposals already presented, including the abolition of the diocesan apportionment, are expected to enable diocese to fund an increase in the NMS to catch up with inflation since 2011, calculated to stand at £32,000 in April 2026 (News, 31 January 2025). This would raise the starting pension, which, it is proposed, will be based on the NMS of the current rather than the previous year.
The final version of the package will be published in the next few weeks. If approved, it would represent “a sea change both in clergy well-being and as to the wider programme of simplification of the national church finances”, Mr Hughes said.
