Vicars’ pensions under threat as church is seduced by equity cult
By Norma Cohen, FT
Young Anglican vicars are facing the prospect of a bleaker retirement after the Church of England’s pension scheme succumbed to the "cult of equity" and sank 100 per cent of its investments into stocks towards the end of the 1990s bull market.
The Church of England’s current pension scheme for the clergy is now considering sharply curtailing the rate at which they accrue benefits. For a young clergyman, aged 30, these benefits could turn out to be less than half of what recent retirees are receiving.
Shaun Farrell, chief executive of the Church of England Pensions Board, said the collapse of share prices had driven a "huge great hole" in the finances of the scheme, which was created in January 1998. But he said the scheme had invested in equities because its pay-out date was a long way off and "equities will give you the highest returns over the long run".
Pensions experts said the 100 per cent concentration in equities was unorthodox. The average UK scheme had just over half of its assets in equities last year and many plans are reducing that in favour of investments such as bonds.
John Ralfe, an independent pensions consultant who has studied the accounts of all the church’s pension schemes, said the investment strategy was unusual – and highly risky – even by the standards of UK funds, which have long been biased towards shares. "People who are putting money into the collection basket on a Sunday morning do not expect money to be gambled on the stock market," Mr Ralfe said.
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