Church of England scheme deficit grows to £352m

The deficit, which had more than doubled since 2006 when it stood at £141m, was blamed on the financial crash and the fall in government bond yields.

Despite the church making additional contributions to pay down the shortfall it said if conditions remain unchanged at the end of the year - when the next formal valuation takes place - there would need to be a "significant increase in the pension contribution rate".

In April the trustees concluded the deterioration in the funding position necessitated an interim increase in the contribution rate from 39.7% to 45% of the pensionable stipend with effect from January 1, 2010 - pending the results of the next triennial valuation.

The latest report - prepared by a pension task group of high ranking clergy - concluded further changes will be necessary "to return it to affordability".

Proposed changes included limiting the annual increase in the pensionable stipend; moving the accrual period for a full pension from 40 to 43 years for future service; changing the pension age from 65 to 68; and contracting back into the state second pension.

The report also set out options for the future structure of the scheme including retaining the existing defined benefit arrangement, moving onto a defined contribution basis and introducing a hybrid arrangement.

Task group chairman Andrew Britton said: "It is regrettable that the church is having to consider further changes to the scheme, but unless there is a dramatic improvement in the value of the pension fund in the second half of this year, further action is unavoidable. We believe that we have identified some options that will deliver a good pension within the limits of what the church as a whole can afford."