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16 Jan 2003 : Column 836—continued

Mr. Speaker: The Liberal Democrat Chief Whip, the hon. Member for Hazel Grove (Mr. Stunell) has written to me on that matter. Perhaps I may be given the opportunity to reply to the hon. Gentleman.

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Orders of the Day

Church of England (Pensions) Measure

1.21 pm

Second Church Estates Commissioner (Mr. Stuart Bell): I beg to move,


This is the first Church of England Measure to be debated in this Parliament, so I welcome hon. Members on this august occasion.

The Measure makes provision in two main areas. First, it amends the powers of the Church of England pensions board in relation to certain funds that it holds in statutory trusts for the benefit of its pensioners and their dependants. It does so by transferring them to the general purposes fund established by the board in 1975. That fund is then given charitable purposes that embrace all the former purposes of the funds added to it. The result will be to enhance flexibility to make discretionary charitable provision for its pensioners and others and to reduce administrative costs.

The Measure widens the board's powers in relation to the provision of retirement housing for those who have served in the stipendiary ministry. Previously, where a couple housed by the board divorced after retirement, the board could continue to house only its pensioner and not the former spouse. The Measure gives the board power to house a former spouse as well as the pensioner and thus enables it to treat both even-handedly.

The Measure clarifies the position as regards the liability for payment of the cost of accruing pension rights where compensation is paid under the Pastoral Measure 1983 and the Incumbents (Vacation of Benefices) Measures. The changes relating to the Church of England pensions board are dealt with in clauses 1 to 4 of the Measure.

Secondly, in clause 5, the Measure extends for a further seven years, from 1 January 2005, the power granted to the Church Commissioners by the Pensions Measure 1997 to resort to capital to pay their pre- 1998 clergy pension liabilities. The 1997 Measure significantly altered the arrangements for the funding of clergy pensions. In particular, it limited the commissioners' pension liabilities to those arising from service before the end of 1997.

Mr. David Drew (Stroud): I hope that the Measures will not be controversial but, given the previous problems experienced by the Church Commissioners, can my hon. Friend tell us what the fall-out might be if there were no improvement in the Church's overall capital position? We are talking about some of the poorer pensioners; it is a myth to pretend that former vicars do not face an extremely difficult situation.

Mr. Bell: I am grateful to my hon. Friend for that intervention. The commissioners' investment performance over the past three years has been adversely affected by the poor return from global stock markets, but their property holdings have mitigated the impact,

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although full figures are not yet available. When they are, I shall ensure that my hon. Friend receives the information.

David Taylor (North-West Leicestershire): I understand that we are talking about assets of about #4.5 billion and that actuarial assumptions envisage that about #2 billion of that will be required over the next 60 years. Can we assume that the actuaries have taken a bleak view of the present stock market position and that things could actually be much better as time goes on?

Mr. Bell: The actuaries estimated that, on the basis of present withdrawals from the funds of the commissioners—the capital to which the Measure refers—which amount to about #30 million a year and possibly more than that, it would take 60 years for half our capital to be divested, or used up. Of course, 60 years is a long time for all of us—we may all be dead by then. However, the pensions liability, according to the actuaries, is long standing and we hope that, with flexibility in relation both to our property investments and our stock market investments, the situation to which my hon. Friend alludes will not arise, but I am grateful to him for putting the question.

Mr. Frank Field (Birkenhead): May I ask my hon. Friend about the other side of that actuarial calculation? The first actuarial calculation to be undertaken for the commissioners relates to how much of the total fund will be required, but the second is for the new scheme that is to be established. Is he satisfied that the actuarial calculations for the new scheme are as soundly based as they should be, given that the situation has changed so quickly over the past couple of years? Might the commissioners want to bring forward the actuarial review of the scheme?

Mr. Bell: I am grateful to my right hon. Friend for that question. As he is aware, the pension schemes to which we are referring are final salary schemes. The essence of the Pensions Measure 1997 was to divest responsibility of the commissioners for future schemes from that date and to pass it to the dioceses. My right hon. Friend raises an interesting point and I shall be glad to take up the question of whether there should be an actuarial review of the schemes and draw it to the attention of the commissioners.

I shall now return to my speech, with apologies to Hansard if it is not the point where I left off.

The Pensions Measure 1997 limited the commissioners' pension liabilities to those arising from service before the end of 1997 and created a new and separate funded scheme into which dioceses—through funds raised from parishes—could pay clergy pension contributions in respect of service from the beginning of 1998. In support of those arrangements, it gave the commissioners power, but only until the end of 2004, both to give financial assistance to diocesan boards of finance and others in taking on the cost of paying those pension contributions and to spend capital in meeting their own pre-1998 pension liabilities.

Mr. John Bercow (Buckingham): I recognise that this a relatively narrowly drawn Church of England pensions Measure, rather than a Bill that seeks to

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address contracts of employment. Given the widespread concern on both sides of the House about the relatively minimal and unsatisfactory employment rights of members of the clergy, does the hon. Gentleman feel able to hold out any prospect that the Measure could be amended so that those whose contracts of employment are terminated might be given additional pension provision?

Mr. Bell: The hon. Gentleman is right that the Measure is narrowly drawn, and not capable of being amended. However, his point about employment rights has been well taken by the Church, which is providing a full document as part of the consultation procedures demanded by the Department of Trade and Industry that will close in July. I will ensure that the question of pension rights in relation to employment rights is linked in our consultation document.

The Measure will alter the last of the powers to which I referred by extending for a further period of seven years, from 1 January 2005, the commissioners' powers to spend capital to pay their pre-1998 clergy pension liabilities. The reason for seeking that extension is that, because of the need to fund those liabilities, the commissioners' expenditure is likely to exceed their income by at least #30 million per annum, a point that my hon. Friend the Member for North-West Leicestershire (David Taylor) made. Without the continuation of the power to resort to capital to meet those liabilities, the commissioners would need to make substantial cuts in their discretionary expenditure or to realign their investment portfolio to generate higher income. Either course of action would be damaging to the Church's long-term interests. It is also worth recalling that while the commissioners' capital is being reduced, the new funded scheme is being increased in size at roughly the same rate because so far it has few pension payments to make, so that, overall, there is no loss of capital at the national level of the Church.

In summary, the Measure both rationalises the administration of discretionary funds in the hands of the pensions board—

David Taylor: My hon. Friend has just announced that the Measure includes provisions that will end the seven-year transitional arrangements, which allowed contributions to diocesan boards of finance and others to help them meet their post-1998 liabilities. The cessation of that will essentially pose extra burdens for dioceses, deaneries and parishes such as mine, which are already groaning under financial pressures. Is he convinced that this is the right time to end that seven-year arrangement? Should it not be extended?

Mr. Bell: The seven-year period is being extended by the Measure. It was introduced in this Parliament in 1997, and Parliament thought that it ought to be brought back after five years. It is now being brought back, and it is being extended. The reason for that is to give the commissioners' flexibility in handling their financial affairs for the benefit of those clergy. My hon. Friend's point about the burdens on dioceses was recognised in 1997, and that continues, but I am happy to say that the powers of giving in relation to Church communities have been enhanced. As far as I am aware, those commitments are being met, although we recognise that they are onerous.

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Extending the commissioners' power to spend capital allows them to manage the resources under their control in the most strategic and effective manner. The Measure is therefore not only important to the pensions board and the Church Commissioners but to those many clergy and their spouses who have faithfully and loyally served the Church over many years. For those reasons, I commend the Measure to the House.


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