THE Church of England Pensions Board has exceeded its target return on investment, but recorded total deficits of more than £300 million across its pension schemes, its annual report states.
The Board controlled assets worth £2.6 billion in 2017 — an increase of about 11 per cent from a total of £2.3 billion in 2016 — which delivered a return of 9.4 per cent. This figure was “significantly ahead” of its annual target returns of three per cent above inflation, the report says.
This increase brought net asset returns over the past 15 years (after fees and costs) up to an average of nine per cent per annum: the equivalent of six per cent above inflation. This was largely because of the “exceptionally strong investment return” for 2016 of 21.2 per cent, the chief investment officer of the Board, Pierre Jameson, said on Wednesday.
The Board has four pension schemes, which provide pensions for about 40,000 people. It carries out actuarial valuations of each of these once every three years.
The main pension scheme for stipendiary clergy for service from 1998 onwards is still in deficit by £236 million, but the Board is on target to recover this deficit by 2025, Mr Jameson said. “There is a deficit-recovery plan which has been in place for several years to recover deficit by 2025, and we are on target to meet that.”
The next valuation of the fund is due to be carried out at the end of this year.
The Church Workers Pension Fund, which covers about 450 employers of lay staff, including diocesan offices, was the last fund to be valued, at the end of 2016, and reported deficits of £43 million.
The chair of the board, Dr Johnathan Spencer, writes in his foreword to the report that the “complex” scheme of many sections had suffered in the economic climate, and that some employers therefore “faced the prospect of an unanticipated negative impact” on their pension fund. “We agreed with each employer a plan to address the funding of their sections, and completed the valuation early in 2018.”
Ethical investment has been an important consideration when investing the Pension Fund, he continues. The Board last year announced a new policy on investing in extractive industries, which “acknowledges the positive contribution that mining can make to development and the material that it provides for many of the products in modern life.
“However, it also highlights that extractives companies are particularly vulnerable to poor governance and ethical controversy, and harmful, long-lasting impacts on communities and the environment.”
Its total income was consistent with the previous year at £28.8 million (£28.4 million in 2016).
Income from grants, donations, and legacies was equal to 2016, at £6.2 million, which included a grant of £4.6 million from the Archbishops’ Council (up from £4.4 million the previous year).
Mr Jameson concluded: “Even given our long-term expectations, it is a much better set of returns than we might have expected at the beginning of 2017, particularly in the context of having achieved well over 21 per cent the previous year.”