§ 8.41 p.m.
§ The Lord Bishop of Bristol rose to move, That this House do direct that, in accordance with the Church of England Assembly (Powers) Act 1919, the Measure be presented to Her Majesty for the Royal Assent.
§ The right reverend Prelate said: My Lords, I beg to move the Motion standing in my name on the Order Paper.
§ If in the 1950s you were to ask any clergy wife what she most feared, she would have answered, the death of her husband while in service. Living in a tied house with limited pension provision, her fears were very real. In 1954 the Church Commissioners undertook the whole cost of clergy pensions on a pay-as-you-go basis. There was no lump sum on retirement. A pension consisted of approximately half the average clergy stipend. With the introduction of compulsory retirement of clergy at the age of 70 in 1976, the issue of retirement benefits came into sharper focus. Today a full service clergy pension stands at £8,533 per annum; the lump sum payment is £25,600 towards the cost of retirement housing. That is thought by many to be adequate but not princely.
§ There are now nearly as many pensioners as clergy in active ministry and so the calls on the Church Commissioners' income to pay pensions on a pay-as-you-go basis are increasing year by year. In 1955 pensions accounted for 7 per cent. of the commissioners' income. In 1990 it was 35 per cent. In the year 2010 it could absorb 90 per cent. of the commissioners' income. There are no doubt those in 1010 your Lordships' House who will make a connection between this situation and the poor performance of the commissioners' property investments in the late 1980s. It certainly exacerbated the problem, but the roots lie in the policy of pay-as-you-go which had the potential to present problems when clergy were forced to retire from stipendiary ministry at the age of 70.
§ If something is not done now, then the historic trusts of the commissioners will not be able to support the ministry of the clergy in needy parishes and dioceses as well as their statutory obligations to bishops and cathedrals from whom much of the present assets of the commissioners derive. The primary role of the Church Commissioners is to support and maintain a nationwide parochial ministry, a role which the Church of England is anxious to continue.
§ It is against this background that I present the Pensions Measure to your Lordships' House. This Measure, after long consultation with diocesan boards of finance, dioceses, the General Synod, and consultation with parliamentarians in the wake of the reports of the Social Security Committee on financing clergy pensions, was passed by the General Synod in November last year with only three votes cast against it. That is as near unanimous a vote as one is likely to get, given the nature of the Church of England. The Ecclesiastical Committee unanimously declared the Measure to be expedient.
§ The essence of the Measure is to be found in Clause 1. It is proposed to reconstitute the pensions board which will be responsible for the payment, out of the Church of England's pension fund, of pensions to clergy, their dependants and others. The clergy will receive their pensions from two schemes, both administered by the pensions board: one called the Church of England Pensions Scheme, which relates to past service to which the Church Commissioners will from time to time transfer sums made up of capital and income on a pay-as-you-go basis; and the other called the Church of England Funded Pensions Scheme which relates to present and future service and will in the main be funded by contributions from dioceses. There are two schemes, one fund, one cheque.
§ In Clauses 3 and 4 the Measure describes the funded scheme. This is a new scheme for future service pensions under a separate trust to be operated under rules similar to those of a normal occupational pension scheme but varied to take account of the fact that the employer-employee relationship is absent because most clergy are office holders not employees. Contributions to that scheme will be made by dioceses from money raised in the parishes and by other organisations which employ clergy. Noble Lords will no doubt be aware of the concerns expressed as to whether or not dioceses would be able to raise what in effect would be a 16 per cent. increase in income. After some hesitation, dioceses were convinced that with the transitional help, about which I shall say more later, they will be able to meet this target. All dioceses have already signalled their ability to do so.
§ In Clauses 5 to 7 the Measure sets out the role of the Church Commissioners. The commissioners, in continuing to meet the cost of past service pensions, will 1011 also be empowered to use both capital and income for transitional payments; that is, to assist dioceses and perhaps others—for example, missionary societies—to make their contributions on behalf of their members to the pensions fund for present and future liabilities. The period envisaged in the Measure is for up to seven years. This will be a significant sum, in the region, it is estimated, of some £60 million. And there is every sign that the transitional period is likely to be between five and six years and not the whole seven.
§ By allowing the commissioners to pay for past service on a need-to-pay basis, using both capital and income, the commissioners will be able to invest their monies so that the best return can be made and the most efficient use made of resources under their control. Before the seven years elapse, during which time the commissioners would have the authority of Parliament to use both capital and income, the Church will need to frame new proposals to Parliament to facilitate the commissioners' continuing responsibility for past service pension liabilities. Such proposals will need to show that the proposed arrangements are working well and command the confidence of both Church and Parliament. By this time transitional payments will have ceased.
§ The final clauses deal with the reconstitution of the pensions board and the taking and using of actuarial advice both by the commissioners and the new pensions board.
§ There were some who expressed a wish that there be the possibility of a money purchase approach through a group personal pension arrangement. It was, however the overwhelming wish of the Church of England, not least among the clergy, to support the proposed scheme which provides uniformity and equity whether one ministers in a rich or a poor parish, within a rich or a poor diocese. The proposals I bring to your Lordships' House command, as I have indicated the widest possible support.
§ The effect of the Measure is to put the costs of ministry on a more secure and more sustainable basis. The clergy and their dependants will be clear that their pensions are fully protected. The Church Commissioners will have the capacity to honour their historic trusts and support the maintenance of a nationwide parochial ministry. The dioceses are ready to meet the demands that the measure will make on their giving. To delay implementation would undermine much of what has been achieved in the past five years. I beg to move.
§ Moved, That this House do direct that, in accordance with the Church of England Assembly (Powers) Act 1919, the Measure be presented to Her Majesty for the Royal Assent.—(The Lord Bishop of Bristol.)
§ Lord Williams of Elvel
My Lords, the House will be grateful to the right reverend Prelate the Bishop of Bristol for introducing this resolution. As the right reverend Prelate will know, I am a member of the Ecclesiastical Committee and discussed this Measure at some length when it came before us.
I have two questions to put to the right reverend Prelate. Given a funded pension scheme—I think we all agree that that would be right—let us suppose that the investments 1012 are unfortunate. The market can go up and it can go down. Judging from the record of the previous Church Commissioners, one would estimate reasonably enough that the market might go down on their investment. What happens then? Is that another burden on the parishes of the Church of England?
The second question is, while I accept absolutely that the Ecclesiastical Committee deemed this measure to be expedient and certainly it is a realistic approach to the future of clergy pensions, what then happens if, within the time period before the guaranteed period, existing clergy who retire under the existing scheme have not yet built up any fund under the measure? What happens to them? Are they to be excluded from this new scheme?
§ The Lord Bishop of Bristol
My Lords, I thank your Lordships for the time which has been given. I will try to answer the two very pertinent questions put by the noble Lord, Lord Williams of Elvel. The first is hypothetical but is nevertheless well asked. I think it would be true to say that the cover that the Church Commissioners' present assets provide in relation to any demands that could be made in the future over a very large number of years is, in fact, twice as much as is asked for. If the hypothetical state suggested by the noble Lord, Lord Williams, came about, I suspect that not only the Church Commissioners and the pension scheme but everybody else would be in trouble. I believe that the cover presently given to past service liability is more than adequate to allow for any fluctuations in the market—other than in the event of a total disaster in the market, in which case everybody would be in the same situation.
§ Lord Williams of Elvel
My Lords, I apologise for interrupting the right reverend Prelate. There was a disaster, and the Church Commissioners did invest in what many people would regard as an unwise manner. They lost what was by any standards a very great deal of money. What guarantee do the clergy have that such behaviour will not recur?
§ The Lord Bishop of Bristol
My Lords, I believe that the Church Commissioners, were they present to defend themselves, would say that they have learnt from their past experience and have put into place the kind of support and oversight which will avoid that happening again. If in fact it were to happen, which is highly unlikely, and given the cover that is presently available—that is, 2:1, which is more than anybody else would have—then I believe that the Church as a whole would be able to respond. It may take time and there may have to be a lot of talking, but I believe that we are responsible for our clergy and we accept that responsibility.
With regard to the second question asked by the noble Lord, Lord Williams of Elvel, if I understand him correctly, those who have received a pension on the basis of past liability that is guaranteed by the Church Commissioners on a pay-as-you-go basis, and those who are for their present and future liabilities dependent upon dioceses contributing sums to the funded scheme, there is every indication—and the House will remember that the Church of England has had to go through a dramatic change in its financial organisation—that the majority of 1013 dioceses already have an excess of income over expenditure despite the diminution of income from the Church Commissioners which was annually theirs. There is a commitment on the whole of the Church of England in its two promises: that we stand together and support each other whatever happens in the future. Therefore I believe that we can say with some confidence that, if there is any shortfall in those incomes in dioceses in the future, we will stand alongside each other. I have already shown that our giving levels have increased significantly and can continue to do so to meet the needs of the clergy, which by and large parishioners see as their responsibility.
I thank the House for having listened to me and for providing the time. I commend the measure to the House.
§ Lord Thurlow
My Lords, as a member of the Ecclesiastical Committee, I should like to emphasise the unanimity with which the committee agreed that this measure was expedient. We were entirely satisfied, after discussion; and while an element of hypothesis is inevitably attached to some of the figures that may eventuate in five or six years' time, I entirely accept the right reverend Prelate's view, the view of the Synod and the Church as a whole, that the future can be faced with confidence and that we need not fear the kind of dreadful contingencies that were mentioned. Anything is possible, but is not, to any informed view, likely. I support the Motion.
§ The Lord Bishop of Bristol
My Lords, I thank the noble Lord for his support and for the comments he has made.
§ On Question, Motion agreed to.