Baptist Pensions

I hesitate to blog about pensions, since I’m no expert, but several people have visited this blog having searched for ‘BU pensions’ so here is my personal take on the subject.

1. It is sad that we have to change the pension scheme but there is no reasonable alternative. Some of the changes are because of pension law; but while the law may be daft the underlying issues would be with us regardless of the law. Put simply people are living longer and the growth of pension fund investments is slowing down so something has to change.

2. The financial sums involved are so large that if we did nothing we would bankrupt the Union, many of the churches and still leave the pension fund unable to meet all its obligations. Clearly the Union can’t put itself in that position, neither can the Pension Fund Trustees nor any sensible church leadership so something has to change.

3. The main change is from a defined benefits scheme (where in return for a set contribution the pension fund guarantees to pay a proportion of final stipend/salary on retirement) to a defined contribution scheme (where the pension contributions are invested so that on retirement the retiree can buy an annuity so provide regular income in retirement).  This moves the investment risk from the pension fund (therefore the churches and Union) to the member minister. But it also increases flexibility as people will work longer, work part time and the like so that in future ministers will be able to adapt their pensions to suit them.

4. It is important to note that the benefits ministers have from the old scheme will not disappear; so for the next couple of decades most ministers’ future pension will be a mixture of old and new schemes; providing insulation against big swings in investment performance. Those joining the new scheme as young ministers will build up a sufficiently large pension to smooth out the short term ups and downs of investment performance.

5. The deficit payments will enable the pension fund to meet the long term liabilities it has got. While it seems unlikely at the moment if pension funds suddenly started doing very well the payments would end sooner and (dream on) if there was a surplus this could be returned to the church.

6. Let’s not forget why the Union started trying to provide for retired ministers in the first place. It wanted to ensure that those who served as ministers for the majority of their working lives were able to live in retirement. This basic need hasn’t disappeared. The aim of the new scheme is to create a pension fund that does this and also provide some protection for ministers who are unable to work because of illness.

Personally I’m sorry the old scheme has to close, I suspect that in 20 years time we will wish it had not done so. I’m also sad because the nature of defined contribution schemes is that they are less efficient. If we had enough money to ride out the storm for the next two decades I would keep going and redefine the benefits accrued. But we don’t and we have to be wise stewards of the resources we have.

Let’s also keep our focus on the things that matter most. Those of us who came into ministry did so because we were called to it, not because we would become rich or enjoy a comfortable retirement. Some financial planning is right and proper but we must not let it detract from the call to be making disciples and building the church.