Pension reactions

George Austin looks again at current developments in clergy pensions and the reactions to his earlier comments upon the changes that are being planned

New Directions articles do not, I find, produce much response, save from the occasional aggrieved bishop - even though many bishops would claim not to read such a decadent journal. Not so when I wrote about the new pension proposals. A similar piece for the Retired Clergy Association newsletter even gained a response from the Secretary and Chief Executive of the Pensions Board itself.

In it he clarified some of the issues which had caused some anxiety - as I had hoped. For those already pensionable, it is a relief to know that 'pensions in payment and all pension benefits earned up to the point of change (1 January 2008) will continue to increase annually in line with RPI up to 5%.' This is a legal requirement and 'it is only benefits earned after the date of change that will be subject to the lower 3.5% cap'. The same is true of all pensions at the point at which they first come into payment, so that 'they will be continue to be based on the National Minimum Stipend fixed by the Archbishops' Council and the Central Stipends Authority'.

Added strain

He does however misunderstand the point I made about the 'additional strain put on the pensions fund by clergy entering the ministry at a later age'. It is certainly the case, as I suggested, that in the Eighties younger candidates 'were discouraged from entering the ministry on the grounds that they needed more experience of life'. Let me explain the problem, using notional figures: if in 1968 there were, say, 500 ordinations of whom 400 were in their mid-20s, then in 2008 those 400 would be eligible for a full pension. If in 1988 there were again 500 ordinations of whom 400 were in their mid-40s, those would also - together with the 400 from 1968 - be able to retire on a pension.

This would of course be a half pension rather than a full one, but it would mean that the Pensions Board would in effect be paying the equivalent of 600 full pensions. As I said in my article, 'some of us then tried to point out that with many more older candidates, these would reach retirement at the same time as clergy already then approaching 50, putting a strain on clergy numbers as well as affecting the pension requirements'. It still seems to me to be what I described as a 'simple mathematical equation. And ask those clergy and parishes now finding that they must share a priest - sometimes with ten other parishes - if this has not also had a deleterious effect on parish life and the pastoral ministry.

CHARM scheme

Also clarified was the fact that differentials still apply with the CHARM scheme, so that clergy who retire to the more expensive counties of south-east England have an increased purchase limit of 225,000. This was always the intention of the original discussions of the committee on which I served in the 1970s that produced the report on Housing for the Retired Clergy. It is perhaps an indication of the different world in those days that in November 1972 an announcement was made to the General Synod that the Pensions Board were about to increase the mortgage amount from 80% of the value of the property to a maximum of 3,500, to 90% with a maximum loan of 7,500 at an interest rate of 8%. It seems that house prices are slightly higher today!

Returning to 2008, the secretary of the Pensions Board also revealed the curious fact that 'the economic interest in the loans granted to the Pensions Fund to fund the CHARM mortgage scheme' which has been sold to a private company 'covers loans granted to the Board over the period 1983-2004 only'. Why only that period? Of course it could be because of a very forward-looking financial decision in expectation of the present fall in the value of houses, some prophesying a drop of as much as 30%, making it a considerable loss but one now not at the expense of the Commissioners. But he then goes on to say that this sale 'does not change the position of any CHARM users. Their relationship is, and will always be, with the Pensions Board and not the third party purchaser'. That is as it should be - but is it as it really seems to be to the pensioner? And it is certainly here that problems have been raised in letters that I have received.

One problem that the elderly must face is growing incapacity. To meet this, my wife and I have decided to move nearer to our son in London so that we are 20 minutes away rather than 200 miles. But we are fortunate in that we own our own house, and if the house we are selling decreases in value, so too does the apartment we will hope to buy.

Privatization

But as one correspondent points out, 'those of us in the scheme are trapped in our retirement accommodation. Should we need to move there is no way we can afford to do so because according to the terms of the scheme we have to sell up and start from scratch'. For him, this would mean trying to service a loan of something like 130,000 in order to move to a similar property, instead of on the 50,000 mortgage he took out when he retired seven years ago.

In his case, he adds, 'the Commissioners' investment of 49,000 is now worth something like 120,000'. He adds, very reasonably, that 'surely they could see their way to allowing one move in the course of a long retirement to properties of a similar value without applying monthly interest payments which are frankly more than could possibly be met. They would not have to find new money. The current value of their loan would simply be transferred to a different property'


Two masters

Very reasonable, yes - if the loans were still the property of the Church Commissioners who would be dealing with the matter as a charitable institution using their own money to meet the pastoral needs of the clergy. But the CHARM scheme has now been privatized and it is perfectly understandable that the first duty of a private institution is to its shareholders. Lhe private company cannot be blamed if those pastoral needs are no longer the first priority, however much the Pensions Board would wish them to be.

Another priest wrote to tell of a similar problem. He had purchased a property on retirement more than fifteen years ago, providing half of the cost himself and with a CHARM mortgage for the other half. Last year he realized that if he sold, thus receiving half of the much-increased value of the property, he had the resources to pay the other half to the Trust so that he would own the property himself. He had the property valued by an estate agent but claims that, without inspecting the house, the private trust valued it at 5% more than the local agent. Since then, after some haggling and more help from the Pensions Board, the matter has been dealt with satisfactorily. But it does not seem to fit in with the claim that the relationship 'is and will always be with the Pensions Board and not the third party purchaser'.

This is in no way an attack on the Pensions Board, for whom, like most clergy, I have the greatest respect, and I recognize that they are in a sense caught between two masters - the Church Commissioners and Archbishops Council on the one hand and the private trust on the other.

The retired clergy owe much to the efforts made over the years both by the Board and by the Commissioners. It is hard to think that only thirty years ago serious efforts were being made to bring the pension rates to a reasonable level, so that in 1981 the level of the basic pension rose 25% from the previous year to 2,500, gradually achieving the aspiration of a pension of two-thirds of the previous year's basic minimum stipend. But constructive criticism and responsible debate is important. As in all matters, any decision is never - or should never be - the final one, and we are only certain to get it wrong when we think it is. Experience uncovers the need for reform in order that we may learn from that experience.


Need for reform

If rumour is correct, then this is precisely what is happening. One correspondent wondered if assessment of mortgages could be further related to local prices and added that his own had to be supplemented by the diocese. Another suggestion was that proportionate help might be given with maintenance and repairs since this at present 'seems to be servicing the Commissioners' already healthy investment'. This might be more difficult with their sale to a private trust, but it is said that such matters are being considered.

The gravest problem seems to be where with increasing infirmity the pensioner wishes to sell up and move nearer to family. This is precisely what my wife and I intend to do and because we own our property it is no problem. Had we had a CHARM mortgage, I would have assumed that in this situation it would, as it were, move with me - in other words, that it would have simply been transferred to the new property.

Whether or not this is the case with those mortgages not sold on to the Trust (that is, from the period 1983 and 2004 according to the Pensions Board), there is surely at least a moral obligation to make this the case with all such mortgages. Of course, the private trust will be quite properly concerned for the best return on their investment and their duty to any shareholders. But the Commissioners have a pastoral duty at least to face up to this deeply unfortunate situation and to do so with haste.

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