Examination of Synod Representatives (Questions
MONDAY 22 APRIL
20. I do not think there is any desire here
to cause any unnecessary difficulty but the problem is I have
a terrible feeling we have only got one piece of the jigsaw. If
the argument about a closed pension fund is correct, the thing
about closed pension funds, as many people have found to their
considerable dismay, is that they do not allow, because they are
not growing, for any increase in the amount that is paid out to
the pensioners. We have been told today that this is only one
part of the equivalent decision-making process, therefore I think
there is an area of doubt. I am not clear, if this Measure goes
ahead, whether there is any other provision. No one could accuse
me of being an economist but it is a bit frightening the amount
of money which is involved and the speed at which it appears to
be being used up. I am not at all sure that Parliament would be
quite happy to allow this kind of Measure to go ahead without
the reserve power of ensuring they know what all the other relevant
decisions are which will affect the size of the pensions, the
people who are concerned or the other funds which would be used.
If you could just put our minds at rest on that, it might be a
little clearer. At the moment it does seem to me that this is
a Measure which deals with a very limited and narrow point and
many other relevant bits of information are missing. The other
thing which Mr Field did remind me of is that Synod would be voting
on spending somebody else's money, whereas both Houses have a
nasty habit of taking decisions on spending their own.
(The Reverend Dr Turnbull) My Lord Chairman, the length
of time over which capital is going to be spent is approximately
60 years, and the reason for that is that clearly there are no
new members of the pension scheme under the Church Commissioners'
responsibility. So when the member refers to it being spent very
quickly, I am not sure I quite follow that. It is being spent
out over 60 years. Effectively the last pound is spent when the
last pensioner dies; that is what determines the length of time
over which that capital will be spent. So it will be gradual over
those 60 years.
21. And the sum is about £1½ billion?
(The Reverend Dr Turnbull) Yes, the total sum. The
total assets of the Church Commissioners are approximately £4½
billion and so it is going to be in the region, on current actuarial
estimates, of about £2 billion which would be spent on that,
leaving about £2½ billion to fund those on-going other
matters of expenditure.
22. And the assumption is that none of the existing
pensioners would be in a position to have their stipends altered?
(The Reverend Dr Turnbull) I am sorry, could you say
Mrs Dunwoody: What concerns me is that you are in
effect creating a closed fund, on the assumption the number of
people benefiting from it is going to decline over a period of
60 years. Are you assuming that none of them will ever get benefits
beyond the extension of that particular fund? That is what concerns
me. Or are you saying this is dealt with in a different way, and,
if so, why is that information not available to us today?
23. It is inflation-linked I think. It is linked,
is it not? It goes up?
(Mrs Alexander) Allowance has been made in the calculations
for pensions in payment to increase in line with the national
minimum stipend. It is an unusual feature of the pension scheme
and it does mean that there is no differential across generations
in the size of the pension.
24. So it is actually a different closed pension
fund because it is a pension fund linked to earnings and not prices?
(Mrs Alexander) Yes.
25. So it is linked in that sense?
(The Reverend Dr Turnbull) That is correct.
26. I rather like the image of the closed pension
fund and I think it has been very helpful to the Committee, but
in a closed pension fund in ordinary circumstances you start,
if you like, with a sum of money set aside for a pension. What
I would like to understand is, as far as the Church Commissioners
are concerned, is it not trueand I hope I am wrongthat
that was not the case? What happened was, the Church Commissioners
had a large pot of money and they used it for a series of different
things and pensions was one of the things they used it for. We
have now got to a stage where future pensions would be funded
in a different way and therefore you create in an artificial wayI
use the word crudelythe amount of money which you put aside
for pensions because that is the amount of money you need for
the pensions. It is not that there was a special fund or pot in
the first place. Is that right?
(The Reverend Dr Turnbull) It is certainly the case
that there was no funded pension scheme, that is what changed
with the Pensions Measure 1997 and the discussions which took
place at that time. Certainly since 1954 it has been the responsibility
of the Commissioners to fund pensions but they did it on a pay-as-you-go
basis until 1997 when the decisions were taken on the Pensions
Measure and the funded scheme.
27. But they expected to fund that out of income?
(The Reverend Dr Turnbull) Yes, that was certainly
the case up until 31 December 1997 but not since.
28. The Commissioners have had four years now
from the Pensions Measure in 1997 giving them the ability to expend
capital assets in this way, and one particular year is indicated
in the notes here, £34 million. Could you tell us what the
aggregate expenditure of this kind is since you have had the powers
so to utilise and what proportion that represents? We have heard
the capital assets of the Commissioners are £4½ billion
and you anticipate in 2002 about £2 billion of that will
be expended in this way over the next 60 years. What proportion
of that has been expended in the first four years?
(Mr Harris Hughes) Last year, my Lord Chairman, approximately
£41 million; in the preceding year £34 million; I speak
from memory but in the previous year it was about £20 million
and in the first year about £15 million.
29. So that is rising at a significant rate,
my Lord Chairman, is it not? There must be some other factors
of which we are unaware which will pull that rate of draw-back
to the figures you are talking about over a 60 year period, just
45 per cent of the capital assets being expended? On that trend,
and I have not got a calculator in front of me, it would not be
(Mr Harris Hughes) My Lord Chairman, the pattern which
is predicted by the actuaries is obviously influenced by the expected
retirements. The outflows of capital from year to year will vary
a bit, depending on flows of investment income, and we have begun
to be squeezed by the loss of ACT relief, which has had a certain
bearing on this and will continue to have a bearing in the next
few years as the transition for a charity runs out. We have also
seen a slight fall in other investment income partly because dividends
have tended to fall in the UK and because we invest a bit more
abroad. So you are, Sir, right, there are two sides to this equation
but the pattern ought to be relatively stable.
Lord Campbell of Alloway
30. This follows on really from the last question,
you have spent about £130 million in the last four years.
To what extent was that occasioned by erroneous calculations?
That is the first question. Who made those erroneous calculations?
What is being done to cure the erroneous calculations? Because
I agree with other members of the Committee that I am extremely
worried about giving a licence to hand out capital instead of
investing for income in this situation. It does not seem to me
that there is an adequate control at the centre.
(Mr Harris Hughes) Mr Lord Chairman, the Commissioners
would not accept that there had been erroneous calculations. We
have a pension promise to honour in respect of those who had earned
pensions prior to 1998 and the estimate of those pensions has
been remarkably accurate from year to year on the advice of Watsons
as we have gone forward. The shape of the portfolio itself will
change in the light of investment conditions and, as this Committee
will know, it has changed quite significantly since we discussed
with you the 1997 Measure, because we have less in property and
more in securities. So the amount of genuine income we have to
dispose will vary a bit, and has tended to come down for reasons
I have mentioned, but the basic pattern is not one of error, not
one of miscalculation or of surprise. The only reason we seek
the permission of Parliament to renew the power is to preserve
the flexibility on which good performance in the last five years
has been based.
Baroness Rendell of Babergh
31. My Lord Chairman, we have talked a lot about
pensions for clerks in holy orders but what about church workers?
What is meant by a church worker, or should I rather say, when
is a church worker not a church worker? Are there categories?
You could almost say when does a church worker stop being a church
(The Reverend Dr Turnbull) The Measure before us deals
only with the stipendiary clergy, Clerks in Holy Orders. The Pensions
Board administers two other pension schemes, one of which is related
to church administrators, those who work in the administration
of the church, and one of which refers to church workers, which
is another category but not the ordained clergy. That is not part
at all of the Measure that is before us today, which deals only
with stipendiary clergy. Those are two other specific pension
schemes administered by the Church of England Pensions Board.
Baroness Rendell of Babergh: It is not very clear.
Lord Brightman: My Lord Chairman, I have three questions
I would like to ask on clause 1, but it would be quite inappropriate
for me to ask the questions until all matters of policy have been
dealt with, so I am not certain whether I am to proceed now or
Chairman: I think it would be helpful probably to
complete this discussion and then come back to clause 1, if we
32. My question is a very simple one and it
follows on from the very first question which was asked. You have
said you have had actuarial projections which have supported the
case you are putting to us. You are asking this Committee to agree
to say that the Measure is expedient, do you not think we should
actually have those projections put before us to be able to come
to a decision? I think you are asking us to approve something
for which you have had the information, and I think it is quite
evident from the questions which have been asked this afternoon
we are not completely satisfied. You could be absolutely right
but we should have that information.
(Mr Harris Hughes) We are entirely willing, of course,
to set the actuarial advice before you, my Lord Chairman. I would
only say, Sir, that the basis of it has not changed since Parliament
approved the 1997 Measure.
Mr Gummer: Would it be appropriate to talk about
one other issue which was raised when we talked earlier?
33. Yes, indeed. I have one more question to
ask on this issue if everybody else has finished on this issue.
To take the figure of £34.7 million which you spent out of
capital in the year to 31 December 2000, what percentage is that
of the total funds available to the Commissioners allocated to
pensions? Just give me a rough percentage.
(Mr Harris Hughes) If I do it in my head, my Lord,
I will get it wrong. It is £34 million of, as it then was,
say, £1.8 billion.
34. Could somebody do that because I think it
is quite a relevant question. Can we reach agreement on that?
(Mr Harris Hughes) 1¾per cent.
35. The Commissioners are planning that they
should expend half their capital assets on pensions, I simply
wanted to ask whether any of the other outgoings which the Commissioners
expect they will be required to make over the equivalent period
will need to be met from capital as well or whether all the other
liabilities they are going to incur will be met by income?
(Mr Harris Hughes) My Lord, only pensions.
Chairman: I think we could now go back to Clause
1 and Lord Brightman.
36. These are simple questions, they are not
matters of policy, my Lord Chairman. The first question is this,
sub-section (2) applies to gifts made, generally speaking, for
the relief of poverty and for the provision of homes of residence.
Does the sub-section cover gifts made both before and after the
Measure comes into force?
(The Reverend Dr Turnbull) I think that must be the
case because at the moment, my Lord, the General Purposes Fund,
which is referred to in sub-section (2), is an existing fund of
the Board but it is not a statutory fund. So the first thing that
is happening is that the General Purposes Fund as it currently
exists is being established as a statutory fund, and it is then
referring to any subsequent gifts in addition paid into that fund.
37. Do you think it would be clearer to say
"gifts made or to be made"?
(The Reverend Dr Turnbull) I think, Lord Chairman,
I would need to take advice from our lawyers on that matter.
(Mr Slack) My Lord Chairman, standing counsel is not
convinced that it would necessarily be clearer. I think some assistance
is given perhaps by clause 2(2) which does deal with the question
of sums which are, whether before or after the coming into the
force of the section, given to any of the three named funds and
are deemed to be donated to the General Purposes Fund and may
then accordingly be applied for the purposes set out in clause
38. Are you saying that it will be less clear,
in other words more ambiguous, if it said, "gifts made or
to be made"? Would that be confusing?
(Mr Slack) My Lord Chairman, I think the view is taken
that it is clear as it stands.
39. The second question is that we know from
sub-section (4) of section 1 that the General Purposes Fund will
be able to be used for any of the purposes in sub-section (2).
One of the purposes is the relief of poverty in the case of any
child of a deceased clerk or church worker, that is (2)(b). Does
"child" mean progeny of any age or under 21 or 18 or
(Mr Slack) I am not aware that is a defined expression
in terms of the Measure with which this has to be construed.