Church of England Pension Returns 9.4% in 2017

The Church of England Pensions Board reported a 9.4% total return for all pension assets in 2017, easily beating its target returns and raising the total asset value of its pension funds to £2.6 billion ($3.41 billion).

The return was significantly ahead of its target, which is inflation (as measured by the retail prices index) plus 3%. Over the past 15 years, net returns for the plans’ assets, after fees and costs, are 9% per year, which is the equivalent of inflation plus 6%.

Total income for 2017 was £28.8 million, up from £28.4 million in 2016, while income from charitable activities was £19.9 million, compared to £19.6 million the previous year. Meanwhile, the pension deficit liability was £1.5 million at the end of 2017, down from £1.9 million at year-end 2016.

The Church of England Pensions Board is the trustee of four pension funds: the Church of England Funded Pension Scheme, the Clergy (Widows and Dependants) Pension Fund, the Church Workers Pension Fund, and the Church Administrators Pension Fund.

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The board provides retirement services for approximately 40,000 people who have served or worked for the Church of England, including more than 10,000 retired clergy.

According to an independent audit, the church has “a significant level of long-term debt liabilities on the balance sheet (£99.6m), which require servicing and which if called in would require the group to sell a large proportion of their property portfolio.”

The board holds a large number of properties on the balance sheet value at £224.6 million, which it uses to meet its charitable objective of providing housing to retired clergy. The properties are held as security against the funds’ liabilities.

The board also manages the Secretariat to the Ethical Investment Advisory Group (EIAG) on behalf of the Church of England’s national investing bodies, which include the Church Commissioners, the Church of England Pensions Board, and the CBF Church of England funds managed by CCLA Investment Management Ltd.

The role of the EIAG is to advise the national investing bodies on ethical investment policies. It currently does not invest in companies that have significant involvement in gambling, the production and sale of alcohol, tobacco, defense, or high-interest-rate lending.

In late 2017, the board announced a new policy on investing in extractive industries.

“Ethical investment considerations are very important to us when investing the pension funds,” Jonathan Spencer, chair of the pensions board, said in a release. “The new policy acknowledges the positive contribution that mining can make to development. However, it also highlights that extractive companies are particularly vulnerable to poor governance and ethical controversy.”

Tags: Church of England, Church of England Pensions Board, Fiscal 2017, Returns

Millennials are on track to replace more of their income than older generations, thanks in large part to the Pension Protection Act of 2006, according to a recent survey from the Empower Institute, a retirement plan record keeper.

The survey, which polled 4,000 working Americans aged 18 to 65 who are saving for retirement in a workplace plan, projected that millennials are on pace to replace 75% of their income in retirement, compared to 61% for Generation X workers, and 58% for baby boomers.

The study attributes the relatively high replacement rate for millennials, who it defines as anyone born after 1981, to the Pension Protection Act of 2006, which was enacted just as the group began entering the workforce. The reforms allow automatic enrollment of plan participants, automatic escalation of participants’ contributions, and requires employers to pay certain minimum required contributions.

In the 12 years since the legislation law was enacted, the reforms have made it possible for defined contribution plans to offer a new mix of innovative components, said the Empower Institute.

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“New features such as auto enrollment and auto escalation have come a long way in making access to retirement savings programs easier for employees and in shaking off some of the concerns of the past with earlier DC plan designs,” Edmund Murphy, president of Empower Retirement, said in a release. “Millennials are the first generation in the workforce to fully benefit from changes in the law made in 2006.”

The survey found that 41% of millennials who responded are automatically enrolled in a defied contribution plan, compared to 38% of Generation Xers, and 33% of baby boomers. Additionally, 38% of millennials are enrolled in a plan with auto-escalation features. The survey found that people who participate in a plan with this feature achieve a median retirement income replacement of 107%, which is 27 percentage points higher than participants without it.

The Empower Institute said the survey also revealed that attitudes about retirement planning differ among the generations. For example, although Millennials have less investable assets compared to the older generations, they are seeking advice and have formal retirement plans in higher rates than baby boomers and Generation Xers.

Additionally, 24% of millennials say they have a formal retirement plan, compared to 19% of Generation X respondents, and 17% of baby boomers, which could explain why fewer millennials (40%) believe they will have to work at least part time in retirement than Gen Xers (44%) and baby boomers (48%). And there is a large discrepancy between millennials and the older generations when it comes to expectations for relying on Social Security for retirement income. Only 59% of millennials expect Social Security to be a source of income in retirement, compared to 88% of baby boomers and 73% of Generation X.

Tags: Millennials, Pension, Pension Protection Act