Pope Francis created a special commission to encourage donations to the Vatican, intending to plug its pension fund deficit, before being hospitalised for double pneumonia.

This additional funding is meant to help plug a widening gap in the finances of the Catholic Church’s headquarters. A key financial headache: The Vatican Pension Fund.

Many Vatican insiders said it has been the tiny state’s worst-kept secret for some time that its pension system is in trouble.

In 2020, the late Cardinal George Pell, who was head of the Secretariat for the Economy at the Holy See, said the Vatican was “slowly growing broke”, citing the ballooning deficit of its pension fund as one of the reasons.

Two years later, the Vatican’s finance czar said in a media interview that he estimated its liabilities to be around €631m in 2022. According to several insiders, this figure will rise to above €930m if the Vicariate of Rome is included. This was the last publicly available figure.

In November last year, the Pontiff asked his closest collaborators for help, as he called for a “new and unavoidable path of change” to address the challenges of the Vatican’s pension system and ensure the economic sustainability of the Holy See.

“The data that now emerge, following the latest in-depth analyses carried out by independent experts, indicate a severe prospective imbalance in the fund, the size of which tends to grow over time in the absence of interventions," the Pope said in a letter to the College of Cardinals and other institutions of the Church.

"Unfortunately, the current system is not capable of ensuring the fulfilment of pension obligations for future generations in the medium term."

The management of the pension fund has long been a concern for successive Pontiffs, Pope Francis said.

"We are now all fully aware that urgent structural measures are needed, which can no longer be postponed, to achieve the sustainability of the Pension Fund," he wrote, adding that justice and equity across generations must remain a guiding principle.

At the time, the Pope appointed Cardinal Kevin Farrell as sole administrator of the Vatican Pension Fund, describing the decision as "an essential step in addressing the challenges that our pension system will face in the future."

It is unclear at this stage how the shortfall could be fixed and how much it has deteriorated.

Many experts think it wouldn’t be appropriate for the Vatican to use money coming from wealthy donors to cover for the underfunded pension liabilities rather than charitable work, which is what they are meant for.

Yet, the Vatican has only limited income streams, such as proceeds from assets it owns, including a vast array of properties and income from the Vatican Museums, besides donations.

The association representing retirees and employees at the Vatican (ADLV) has voiced deep concerns about looming pension reforms, demanding transparency on the scheme’s accounts.

“Data isn’t public,” the ADLV said. “But since we pay our contributions, the accounts should be available to all.”

They added that the majority of the Vatican’s employees have already made financial sacrifices, while their salaries haven’t been raised to compensate for accelerating inflation, unlike rentals of the Vatican’s properties, which were indexed to rising prices.

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