Prince of Wales pensions row: Duchy of Cornwall pension plan has £4m black hole

Prince of Wales told fund managers how to run pension schemes, but Duchy of Cornwall has its own funding shortfall
By Gordon Rayner, Chief Reporter

Having lectured the City on how pension funds should be run, the Prince of Wales is having to get his own house in order after Duchy of Cornwall accounts showed a £3.9 million hole in its own pension plan.

The Duchy estimates that it will take until 2025 to eliminate the shortfall, by which time the Prince will be 76.

The Duchy, which is the Prince’s private estate, had pension obligations of £20 million in the last financial year, but only £16.1m of assets.

In the same year the Prince was paid £18,955,000, a £903,000 increase on the previous year.
The Duchy’s pension scheme pays retired employees of the Duchy, which had a turnover of £28.8m in the 2012/13 financial year.
On Wednesday the Prince told the fund managers that their grandchildren would face "an exceptionally miserable future" if the culture of short-term gains continued.

Condemning what he called "quarterly capitalism" the Prince told the National Association of Pension Funds to put money into environmentally sustainable funds that would deliver better returns in the long-term and help save the planet for future generations.

Malcolm McLean, a pensions consultant at Barnett Waddingham, said the Duchy’s own pension shortfall showed that the Prince was experiencing similar problems to fund managers.

He said: "It’s harder than he seems to think to keep these schemes fully-funded, as his own scheme shows.

"It’s a real balancing act and fund managers are trying to keep lots of balls in the air at the same time."

The Duchy’s pension scheme is a defined benefit scheme, meaning it guarantees a certain income on retirement. Since 2003 new entrants have only been allowed on a discretionary basis.

Mr McLean said: "It’s the type of scheme that has suffered because of people living longer. The problem with closing a scheme to new entrants is that they’re not putting any contributions in to help fund the outgoings, so it creates problems in the short term and in the long term."

A note in the Duchy’s accounts shows that in the current financial year it expects to contribute £900,000 to the scheme, part of which will be extra money to help reduce the deficit.

The Duchy has agreed a "recovery plan" with the pension scheme’s trustees to eliminate the shortfall by making extra contributions over a 15-year period backdated to 2010.

The Duchy’s accounts show that it expects current male pensioners to live to 86 and women to 89, and that future pensioners now aged 45 will live a year longer than that. The scheme paid out £581,000 last year.

In his video message to the NAPF, which was recorded in July but only played on Wednesday, the Prince called on pension funds to help create an economic system "designed for the 21st and not the 19th century".

He suggested that unless investors had one eye on the "maintenance of vital ecosystems", the "real value" of a pension would be lost because the future of the planet would be bleak.

A spokesman for the Prince said: "The current deficit is due to historically low interest rates which are also affecting almost every other pension scheme nationally.

"The deficit is not envisaged to remain the case in the long term."




The Telegraph