THE Church of England Pensions Board has failed to meet its targets for investment returns for the second year running, its annual report reveals.

The Board controlled assets worth £2.3 billion in 2016 — up 35 per cent from last year’s total of £1.7 billion — which delivered a total return of 21.2 per cent.

Despite this strong growth in the funds, the Board admits in its report, published on Wednesday, that it has lagged behind the market over the past 12 months.

The funds in the Pensions Board’s “return seeking pool”, invested largely in company stocks, and in some property, returned 19 per cent, slightly short of the year’s benchmark of 21.4 per cent. Extrapolated over the past three, five, and ten years, the returns have, in each instance, also fallen just short of market benchmarks.

The annual report says that it is “disappointing” that the fund managers missed their targets, but explains that, when markets do well, as they did last year, riskier stocks rise the most, such as “profit-free internet companies and oil and commodity stocks”.

“Institutional quality fund managers and their strategies tend to be exposed to less risky stocks, and, as one would expect, those used by the Board are generally like this.”

The five largest investments in firms as of 31 December were in Apple, Google’s parent company Alphabet, the energy firm Exxon Mobil, Microsoft, and the U.S. bank Wells Fargo.

About 38,000 people, including about 10,000 retired clergy and thousands of diocesan and parish employees, central C of E staff at Church House, and many more working for Church-related charities and organisations, rely on the Pensions Board to administer their occupational pensions. About 2000 further retired clergy and their dependants live in properties owned or administered by the Board.

The Board’s main fund, which provides pensions for stipendiary clergy for service from 1998 onwards, is in deficit by £236 million, according to an actuarial valuation carried out last year. “A recovery plan is in place to bring the scheme back to full funding,” the annual report states.

Both the two other funds, for diocesan, charity, parish employees, and those working for the National Church Institutions, also have small deficits.

About one in four of the retired clergy receives some form of assistance from the Pensions Board in housing. About 1200 rent a home through the Church’s Housing Assistance for the Retired Ministry (CHARM) scheme, which was subsidised by the wider C of E, through the Archbishops’ Council, by a grant of £4.4 million in 2016, up five per cent on the previous year.

The Pensions Board also runs seven supported-accommodation communities, but decided last year to close its one full care home at Manormead, in Surrey, because it was becoming too difficult to recruit and retain enough staff (News, 25 November).

Jonathan Spencer, the chairman, said: “The Board took this heart-breaking decision with very considerable regret, and after a good deal of soul-searching.” All former residents were moved to another home of their choice.

Another significant development in 2016 was the creation, jointly with the Church Commissioners, of an in-house engagement team, which lobbies companies in which the Board has invested ion its ethical priorities.

One area of increasing action was on executive pay: in Britain, the Board voted against two-thirds of all remuneration deals, while in the United States it voted against 92 per cent.

Working with asset-managers who control a total of £2 trillion, the Pensions Board was instrumental in setting up a new scheme to encourage greater action on cutting carbon-dioxide emissions: The Transition Pathway Initiative (TPI).

“The TPI enables us, and others, to make informed judgements about how companies with the biggest impact on climate change are adapting their business models to prepare for the transition to a low-carbon economy,” Mr Spencer said.

“This initiative delivers on the commitments we made, in our climate-change policy, to play our part in supporting the transition to a low-carbon economy.”

Correction: This report originally incorrectly stated that the Pensions Board’s total assets at the end of 2015 were £1.3 billion. They were actually £1.7 billion.