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Cloudy sky for Pensions Board, but legacies up

22 July 2016

iSTOCK

THE Church of England’s Pensions Board has failed to meet its benchmark for investment returns, its annual report has revealed.

Published on Tuesday, the report shows that during 2015 the £1.33 billion of investments controlled by the Board made a total return of two per cent. The target is inflation plus three per cent, which last year amounted to 4.2 per cent.

Spending on pensions, including lump sums on retirement and death, continued to tick upwards however. In 2015, £33.5 million was spent, up from £30.2 million in 2014. There was a similar £3-million increase over the preceding 12 months.

In a statement, the Board acknowledged that last year’s return had been lower than in previous years, but insisted that over the longer term its financial position was healthy.

The report states that, over three years and five years, the average annual return has beaten the benchmark of inflation plus three per cent. But the average annual return over the past ten years has fallen short of the six-per-cent target at 5.4 per cent.

As of 31 December, there were 8377 active clergy paying into a C of E pension, 10,319 receiving a pension, and 3824 clergy dependants also receiving payments.

Throughout the year, a total of 404 clergy joined the scheme, 455 retired and began receiving their pension, and 359 pensioned clergy died.

In total, the Board assists some 35,000 people, including more than 10,000 retired clergy, almost 3000 people employed at some cathedrals, diocesan, and parish offices, and other agencies, and almost 800 people who worked for the national church institutions.

The annual increase in the Board’s pension for retired priests and bishops was pegged at inflation, which last year averaged 0.8 per cent.

When the clergy pension scheme was last valued in 2012, there was a deficit of £293 million between the scheme’s assets and liabilities. The plan is to close this deficit by 2026.

The chairman of the Pensions Board, Jonathan Spencer, wrote in the introduction to the report that the next valuation and opportunity to assess the progress of closing the scheme’s gap would take place later this year.

“We are working closely with the dioceses and other stakeholders in an open and transparent manner on this to reach funding solutions that protect beneficiaries’ interests while taking account of the concerns of those who pay for it,” he wrote.

Another cloud on the horizon for church pensions is the result of the EU referendum, the report states. This is likely to lead to a period of uncertainty for the economy and financial markets, and could make an impact on the performance of the Board’s investments. The result may cause “significant volatility in the valuation of investment assets, including from fluctuations from the impact in foreign exchange rates”, the report says.

Other significant work undertaken in 2015 included a re-financing of the programme Clergy Housing Assistance for the Retired Ministry (CHARM). A £100-million bond was issued to allow the Board to buy more homes (News, 4 September).

The national Church contributed £4.3 million to the CHARM scheme through the Archbishops’ Council’s budget. This was up from £4 million in 2014.

About 1200 clergy and their dependants are currently in the CHARM scheme. A further 1300 also receive some kind of housing assistance through the Board’s retirement homes, or mortgage schemes that are now closed.

One ray of light for the Board’s finances was in donations. Last year, it warned that if donations continued to decline, services offered would have to be cut (News, 31 July). But donations have increased slightly, from £164,000 to £169,000. Legacies have also more than doubled since 2014, from £506,000 to more than £1 million.

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