It is a noisy day for pensions in the FT today and nowhere noisy than in an article from John Ralfe about the Church of England’s pension fund.

The author, pension consultant John Ralfe is far from happy that the CoE is putting up the pensions of clergy (and other employees) in its Defined Benefit Pension Scheme.

The problem he has is with the calculation of the £840m surplus of the pension fund which he doesn’t agree with. He thinks it should be more like £300m using a gilts + 0.5% discount rate on liabilities rather than the more optimistic return used by the trustees (prompted by advisers who come in for some criticism for milking the scheme for fees).

The article also criticises the Scheme for using Repos for its gilt holdings which it points out are a more risky (because of leverage) way of getting exposure to gilts (a remembrance of LDI).

Here are the facts, laid out in the article and clearly leaked for whatever reason. CEFPS stands for the Church of England Funded Pension Scheme.

The CEFPS has 25,000 members including 11,000 pensioners, and £2.6bn of assets at December 2024. It is now finalising its 2024 three-year actuarial valuation, with the December 2023 update showing a healthy £840mn surplus.

This is a very long way from 2008 and 2011, when the Church cut the annual value of new pensions earned to manage costs and control the deficit. The definition of pensionable salary and the annual accrual rate were both cut, and the normal pension age was increased from 65 to 68.

The problem back in the first decade of the century was down to some bad investments in property (the church continues to hold freeholds much to the dismay of those who want a better life for the leaseholders).  But since then things have gone much better for the scheme and it was a big winner in 2022 with its scheme now showing a “whopping” surplus.(see above).

Rather than being super prudent and shunting the scheme assets into bonds, as John Ralfe did at one point with the Boots Scheme, the Scheme will continue (according to the article) to invest heavily in growth assets.

Here the language of the article becomes strong

The Church is still taking huge risks, holding 70 per cent of assets in equities, private equity, infrastructure and private loans, with an assumed return of gilts plus 3.5 per cent.

The 2025 Pension Protection Fund report shows the average pension holding in these assets is just 22 per cent, with the balance in bond-like assets to match pension liabilities — so the CEFPS is a real outlier.

Just why they can do so and use a 3% more aggressive assumption than the Pension Regulator’s  tombstone gilts + 0.5% isn’t explained and I hope that those closer to the Scheme and the quality of the CoE’s covenant will explain.

But the good news for clergy is that they will get back the pensions that originally were promised.

The Church is now so confident about pensions that the February meeting of the governing General Synod gave its final agreement to reverse most of the cuts, with many members seeing a big pension boost from April 2026.

For serving clergy, pensions earned since 2011 will increase by a whopping 61 per cent, according to the Church Times. For retired clergy serving after 2011, pensions earned since 2011 will be increased by about 38 per cent.

Like the mineworkers and their bosses, a radically growth strategy from the scheme has paid off and there will be many more than John Ralfe grinding their teeth. Ralfe calls the CoE’s pension fund asset strategy a gamble

the Church seems to be playing a dangerous game of double or quits, just like betting money at the casino. Would hard-pressed parishioners be happy if they knew what was going on with their donations?

There is of course a similarity between the behaviour of the CoE pension scheme and the strategies of 20m of us who rely on DC pension schemes to pay us in retirement. The only difference is that we have to DIY the pensions from our pots.

The article doesn’t state what the attitude of the CoE’s General Synod is towards its DB scheme, nor the DC scheme which is what is in place going forward (for the moment) nor what is happening with the Cash Balance defined benefits that it administers for affiliated employers.

What we wait for later in the year is the authorisation of a new CDC scheme that will simplify a very complex pension system. That it now has a DB  scheme in surplus there is no doubt, that members and not parishioners are getting the benefit of the surplus will be considered as good news for most who go to the Church and that it is taking steps to sort out the very topsy-turvy pension scheme is good news.

The CoE’s DB pension fund has declared an £840m surplus today , the result is good news and we can now hope that using CDC, the clergy’s retirement will be simpler and  more stable than it’s been so far this century.

It takes some doing to make a good news story gloomy, but this opinion piece in the FT gives it a good go!