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2020-12-31-accounts

The Church of England Pensions Board Annual Report

Year Ended 31 December 2020

Content

Introduction from the Chair and Chief Executive ......................................................................................................... 3 Report of the trustees for the year ended 31 December 2020 .................................................................................... 5 Structure and history .................................................................................................................................................... 5 Public benefit ................................................................................................................................................................ 6 Objectives ..................................................................................................................................................................... 6 Charitable activities of the Board ................................................................................................................................. 7 CHARM (Church’s Housing Assistance for Retired Ministry) ................................................................................... 7 Supported Housing ................................................................................................................................................... 9 Administration of pensions ...................................................................................................................................... 9 Review of 2020 activities .............................................................................................................................................. 9 Pandemic Response ................................................................................................................................................. 9 CHARM ................................................................................................................................................................... 11 Administration of Pensions .................................................................................................................................... 12 The Board’s Approach to Ethical Investment & Stewardship ................................................................................ 13 Financial Review ......................................................................................................................................................... 15 External financing ................................................................................................................................................... 16 Charity Investments ............................................................................................................................................... 16 Risk Management ................................................................................................................................................... 17 Going Concern ........................................................................................................................................................ 19 Approach to Taxation ............................................................................................................................................. 20 Reserves ................................................................................................................................................................. 20 Plans for the future ..................................................................................................................................................... 21 Structure, governance and management ................................................................................................................... 23 Governance ............................................................................................................................................................ 23 The Charity Code of Governance ........................................................................................................................... 24 Trustees .................................................................................................................................................................. 25 Attendance by Trustees at meetings of the Board and its Committees ................................................................ 27 Reference and administrative information ............................................................................................................ 28 Management .......................................................................................................................................................... 29 Statement of Trustees’ responsibilities in relation to the financial statements ........................................................ 31 Consolidated statement of financial activities ........................................................................................................... 37 Consolidated balance sheet ........................................................................................................................................ 38 Charity only balance sheet ......................................................................................................................................... 39 Consolidated cash flow statement ............................................................................................................................. 40 Notes to the financial statements .............................................................................................................................. 41

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Introduction from the Chair and Chief Executive

The Church of England Pensions Board provides retirement services to those who minister and work for the Church of England. As a pension provider we are at the forefront of ethical and responsible investment. As a charity we provide housing and other services to those who have given a lifetime, living out their vocation to ministry in the Church of England in its service to this nation.

2020 has been profoundly marked by the impact of the coronavirus pandemic. For many of our customers, members, Church colleagues, and staff, this year has been very difficult.

Throughout the year we have worked hard to ensure the safety and continuity of key services. Officebased staff made a rapid transition to homeworking, supported by secure IT systems. Pensions and Housing helplines have operated with minimal disruption. Housing activities concentrated on essential maintenance, resident wellbeing during lockdown, and assisting those within 18 months of retirement.

Despite volatile investment markets, total assets returned 9.4% in 2020, with the portfolio benefiting from diversification across asset classes and a long-term approach. This in turn has meant that the funding level for our largest scheme – the Clergy scheme – has held up well.

Meanwhile, statutory valuations of the other two pension schemes (CAPF and CWPF) were substantially completed in the year, with long term strategies agreed for both defined benefit schemes. We are grateful for the engagement of participating employers to achieve this.

Even in the midst of the pandemic, we have continued to make good progress on our strategic priorities: to simplify; to become less financially reliant on the wider Church; and to engage in great conversations with those we serve and companies in which we invest.

In 2020, we put forward important proposals to simplify and reduce the cost of the Board’s governance arrangements, and bring the Board into line with good practice externally. These proposals have been subject to an extensive formal consultation in 2020. They were approved at General Synod on 23rd April 2021 and come into effect from 1 July 2021. Work also continued on two major systems projects in housing and pensions to automate more of our core processes, and enable better service through online tools for customers and staff.

As part of our commitment to climate transition, we launched the FTSE-TPI Climate Transition Index, and co-created a new global Net Zero Investment Framework for pension funds. As the Church’s lead on extractives, we worked with other investors, the UN and the mining industry to establish a global standard on mining safety. These are world firsts, reflecting our ambition that members should be able to retire well, and into a world worth retiring into.

The Board is blessed by the contributions of its Trustees who give freely of their time and expertise. We welcomed Ian Wilson to the Board in the summer. We thanked Jeremy Clack and Deb Clarke who finished their terms on the Board and Investment Committee respectively in December, and mourned the passing of Simon Baynes, a former member. Within the Executive, Michael Pratten was appointed as Chief Investment Officer in succession to Pierre Jameson, who retired in February 2020.

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Even through such a trying year, it remains our deep privilege and joy to serve those who work and minister for the Church of England. Looking ahead we are determined to continue press ahead with our strategic priorities, supporting the vision for a simpler, bolder, humbler Church.

Clive Mather John Ball Chair Chief Executive Officer

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Report of the trustees for the year ended 31 December 2020

The trustees present their annual report and financial statements of the charity for the year ended 31 December 2020. The financial statements have been prepared in accordance with the accounting policies set out in note 1 to the financial statements and comply with the Charities Act 2011, FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” and “Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Finance Reporting Standard applicable in the UK and Republic of Ireland (FRS 102)” (“the SORP”).

Structure and history

The Church of England Pensions Board (“the Board”) was established in 1926 by the Church Assembly (now the General Synod) by the Clergy Pensions Measure 1926, to serve as the pensions authority for the Church of England and to administer a comprehensive pension scheme for clergy. Prior to 1926 there was no proper pension system for clergy.

The Board was given powers in 1948 to provide housing for retired clergy and their widows and dependants, and in subsequent years also became trustee of various charitable funds and trusts to provide for the relief of poverty of retired clergy and their widows and dependants. In 1964 the Board became a registered charity. Since then the funds and trusts have been amalgamated and now exist as a single restricted fund: the ‘General Purposes Fund’; and one linked charity for which the Board is corporate trustee: the ‘Clergy Retirement Housing Trust’.

In its current form, the Board is a body corporate, a registered charity, and is governed by the Church of England Pensions Measure 2018 – the main operative provisions of which came into force on 1 March 2019. Prior to the 2018 Measure, the Board was governed by the Clergy Pensions Measure 1961 (as amended from time to time). During the period covered by these accounts it was the corporate trustee of three pension schemes:

The financial statements of the three pension schemes listed above are not included in this report but are separately available.

The Board administers two other pension schemes, for which it is not a trustee: the Church of England Pensions Scheme (for clergy service prior to 1 January 1998); and the Church Commissioners Superannuation Scheme (for staff service prior to 1 January 2000). The financial affairs of these schemes can be found in the Church Commissioners’ accounts. They have no impact on the financial position of the pension schemes of which the Board is trustee.

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Public benefit

The purposes of the Board are the provision of retirement services set by the Church of England for those who have served or worked for the Church. This is carried out primarily through the provision of retirement housing and through the administration of pensions.

In accordance with the requirements of s17(5) of the Charities Act 2011, in exercising their responsibilities the Board has had regard to the Charity Commission’s published advice on public benefit, especially that contained in its supplementary guidance “The Advancement of Religion for the Public Benefit” .

Nationally, the Church, through its network of more than 12,000 parishes, 16,000 churches and 20,000 ordained and lay ministers seeks to build social capital and provide spiritual care for all those who might wish to engage with matters of faith in a Christian context. The local churches are a focus for community activity, and through resources available at their disposal, provide activities that support community development and social cohesion. These can include projects which support children, families and the elderly.

Retired clergy and their dependants often play a role in these projects. Through the provision of comprehensive pension schemes, retirement accommodation and, where applicable, direct grants to supplement their income, the Board assists clergy in retirement to continue to play a full role in the community.

Objectives

The Board’s charitable objectives are first, to provide the best possible support and care, within available resources, to those who have retired from stipendiary and lay ministry within the Church of England, and to their dependants, through the provision of retirement and supported housing, and through advice services, and discretionary grants for those most in need. Second, the Board’s objective is to meet its responsibilities as administrator for the various pension schemes, as laid out in its governing documents (see Structure and History section).

The strategic objectives of the Board are:

In December 2019 the Board agreed three strategic priorities to guide its work and the implementation of its objectives. These are:

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These priorities together form the Board’s ‘Centenary Vision’.

Around one in five clergy retiring from the stipendiary ministry seek the Board’s assistance with retirement accommodation. Retirement can be a stressful life event for many people and particularly so for the Church of England clergy who have lived most of their working lives in tied accommodation and for whom retirement also entails the stress of moving to a new house. The Board aims to work with clergy to assist them in this significant life transition and encourages early conversations about retirement housing and pension provision. We aim to provide an appropriate level of service over the long term, and retirement housing which is well maintained and suits its purpose.

In 2021, the Board will continue to provide these services within the resources available. We continue to shape and refine the services that are offered to ensure that they are sustainable in the future.

The charitable activities are financed by grants, gifts, legacies and investment income. All donations are placed in the General Purposes Fund unless otherwise specified. We are very grateful to those who have given donations and left legacies over the past year.

Charitable activities of the Board

Around 2,700 individuals – primarily retired clergy and their dependants – receive housing assistance through CHARM rental, supported housing, shared ownership and the (closed) mortgage schemes.

CHARM (Church’s Housing Assistance for Retired Ministry)

The CHARM scheme is the main housing provision made by the Church of England Pensions Board. It is designed to assist retiring clergy leaving tied accommodation and who have not been able to make their own provision for somewhere to live in retirement.

The provision of housing through CHARM is a discretionary facility with the Board specifying various parameters relating to the size and type of property available. The parameters are regularly reviewed.

Information on the CHARM scheme, eligibility and access to the various options is available on the Church of England websites at www.churchofengland.org/housing.

The Board also supports retirees and their households through a Welfare Advice Service which enables us to sign-post individuals to other charities and agencies through which they can access the different types of support available to them, including helping individuals to navigate the state benefit system.

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Rental Property

The rental option is the Board’s core service, with around 1,200 properties let across England and Wales. Customers can choose from a portfolio of available properties across the country up to five years before they intend to retire and “reserve” it for their retirement.

The Board ensures that all properties are in a good state of repair. It uses stock condition surveys to plan and carry out maintenance.

Tenants who moved into their properties after 1 April 2015 pay a “target rent” based on a social housing model; tenants who already lived in a property prior to this date pay a rent which was based on their (joint) income, which is being slowly transitioned to a target rent.

The CHARM scheme is subsidised by the wider Church of England through Vote 5 of the Archbishops’ Council’s budget. The total grant for 2020 was £5.3m (2019: £5.0m). This support enables the Board to continue to offer target rents at a lower level than market rents. The Trustees are grateful for the financial support from the wider Church towards this work.

Shared Ownership

The Shared Ownership option assists 104 households. Properties are bought in partnership with the customer who contributes a minimum of 25% of the property cost. The Board’s maximum contribution is £150,000. Additional shares of the property can be bought by the customer who can buy outright ownership if they wish.

Customers pay a rent, based on the Board’s capital share of the property, and a service charge which reflects the cost of maintaining and insuring the property. The rent is increased in line with the weighted increase in the full Church and State pension for a married couple.

Mortgage Schemes

The mortgage schemes are closed to new applicants.

A fixed-interest mortgage option was in operation until 31 December 1982. Mortgagors had the option to pay interest on the amount loaned during the life of the loan and then on redemption repay the nominal amount of the loan, or pay one-half of the interest due during the life of the loan and on redemption repay the nominal amount of the loan together with the unpaid interest. Four loans were outstanding at the end of the year, two of which the mortgagor is paying the full interest amount on the mortgage advanced, and two of which the mortgagor is paying one-half of the interest due.

A value-linked mortgage option closed on 31 March 2008. Mortgagors pay an interest-only element on the advanced sum, with the rate of interest being subject to an annual uplift in line with increases in Church and State pensions. When the property is sold or the mortgage redeemed, the sale proceeds are divided between the mortgagor and the Board in the same proportions as when the loan was advanced. At the end of the year mortgage loans were outstanding on 537 properties (478 from the Charity and 59 from the subsidiary company CEPB Mortgages Ltd) (2019: 576 properties (516 from the Charity and 60 from the subsidiary company CEPB Mortgages Ltd)).

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Supported Housing

For more than 70 years, the Board has operated supported housing schemes for those retired clergy and their dependants who wish to live as independently as possible in a community of Christians. Some retired clergy, or their surviving spouses or civil partners, no longer feel comfortable living by themselves or find it increasingly difficult to maintain and manage a home of their own. Equally, some wish to continue living within a community where the liturgical and spiritual life of the Church of England is central and practical support is available to enrich older living.

The Board’s seven supported housing communities provide residents with a self-contained flat and also include dining facilities, meeting spaces, libraries, a chapel and communal grounds. The Board charges for the accommodation using a rent and service charge system and operate a subsidy system to assist those of its residents who are unable to pay for those support charges which are not eligible for state assistance.

The total cost of running the supported housing operation including central overheads and costs in relation to former nursing care services, is largely met by the income the Board receives through rent and service charges. The shortfall is met from grants, voluntary donations and investment income received by the General Purposes Fund. In 2020 this amounted to £1.4m (2019: £1.6m).[1]

Administration of pensions

During the period covered by this report, the Church of England Pensions Board was the trustee of three pension funds – the Church of England Funded Pension Scheme, the Church Workers Pension Fund and the Church Administrators Pension Fund.

The administration of pensions for the clergy is one of the charitable objects of the Board; this is carried out at no cost to the charitable funds since the administration costs are charged to the relevant pension fund.

In total, the pensions for more than 41,000 people, across about 700 employers are administered by the Board. Separate reports and accounts are issued for each of the pension schemes.

Review of 2020 activities

Pandemic Response

In 2020, our main focus has been to support our customers through the pandemic, and adapt our services to keep customers, partners and our team safe. With the onset of the pandemic in March 2020, we deployed tried and tested business continuity plans to move our office based staff to home-working using

1 See note 4 for further details of the shortfall between charitable income from rent and service charges, and charitable expenditure incurred.

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secure systems. During the year this was strengthened through additional IT kit enabling the pensions and housing helplines to maintain a good level of service to our members and participating employers.

At an early stage, we wrote to all members, residents and beneficiaries to advise on our Covid response plan, and a dedicated webpage has been maintained and updated throughout the crisis. This has been supplemented with other advice, such as guidance on how to avoid pension-scams, and specific communications with groups of customers, for example those with self-select DC funds and those registered for housing and within months of retirement.

In relation to Housing, during the national lockdown in the spring, our team reached out to many of our 2,700 residents by telephone to check on their wellbeing and to offer help to access local support networks as needed. In line with Government guidance, we also temporarily paused all house moves across our portfolio. However, throughout this period, our emergency repairs service continued through Sanctuary, our maintenance contractor.

As the year went on, plans adapted as needed, to changing guidance and restrictions. In the Summer, non-urgent repairs, property viewings, and house moves restarted with the right health and safety measures in place. Our team worked hard to match those closest to retirement to a suitable home. Thanks to the extraordinary commitment of staff and residents, our Supported Housing schemes remained Covid-free throughout 2020.

Within Supported Housing, additional procedures were put in place in line with government guidelines and with the support of staff and residents. Some of our staff made extraordinary personal commitments, such as temporarily moving into guest rooms to ensure they would not bring infection into the schemes. It was a delight to see that by the end of the year, the first of our Supported Housing residents received the Covid vaccination.

The Board sought to control expenditure carefully in the face of uncertainty, and maintained a regular and open dialogue with its lenders. It monitored the liquidity position for both the pension funds and the charity on a regular basis, and continues to do so.

In respect of the Board’s pensions operations, the Board worked closely with employers and colleagues in other national church bodies to monitor the employer covenant and engage where needed. The Church Commissioners and Archbishops’ Council put in place a package of financial support measures for dioceses and Cathedrals, and emphasised the importance of maintaining pension contributions. There were no formal enquiries for contribution easements during the year, though sadly we have seen some church bodies reduce the number of staff employed. We are also sad to report that the UK trend in excess deaths also appears to have been reflected in the experience of our pension schemes. Staff sought to respond pastorally and professionally to this additional workload while facing challenges in their own personal lives.

Throughout this period, the Board has followed the advice from and been in contact with the relevant regulatory bodies for its activities. It has also been supported by its professional advisers.

While some of our plans had to be changed, the Board continued to deliver most of its core services and make progress on its development plans, including all the matters identified as future plans in the 2019 Annual Report, with the exception of the conscious decision to purchase fewer properties than planned.

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Our Covid response has continued to adapt in 2021 in response to changing national restrictions and government guidance, as well as the roll out of the vaccine programme where many of our Supported Housing residents were fortunate to be among the first million to receive the vaccination.

CHARM

The Board continues to be able to assist around 2,700 retired clergy and their dependants through the CHARM scheme (including the historic mortgage arrangements).

The Board’s strategy for the main rental scheme is to build up a portfolio of suitable properties which can be held for the long term and will be suitable for re-letting when they become vacant. This requires a transition away from historic Church Commissioner funded properties, which are sold as they fall vacant. In line with this strategy, the Board purchased 17 new rental properties during the year (2019: 54 new rental properties) and was also able to re-let a number of existing (Pension Board funded) properties to meet demand. The reduction in purchases compared to the previous year, and plan for 2020, reflected the pandemic response. Given wider economic uncertainty and practical constraints on the property market, the Board sought to minimise purchases, and instead work closely with those approaching retirement to match them to available properties where possible. This approach was so successful that it will be adopted on an on-going basis. Specific properties continued to be acquired where needed – particularly in response to ill-health retirements – and surplus properties were marketed for sale. Overall there was a net decrease in the size of the rental portfolio from 1,192 at the end of 2019 to 1,187 at the end of 2020. The proportion funded by the Pensions Board increased to 79% (2019: 78%).

In addition to rental properties, the Board continued to assist customers through the shared ownership scheme. One new shared ownership property was purchased in 2020 (2019: 2).

The Board continued to provide supported housing through its seven supported living schemes, housing 297 residents in 2020 (2019: 266). Following a necessary hiatus through the summer, viewings and moves were able to resume in the autumn with the adoption of appropriate safety procedures.

We have continued to provide support to our customers through our Welfare Advice service. In 2020 we supported almost 260 customers (2019: 200) in accessing local authority support and benefits to which they are entitled, as well as in signposting individuals to other charities as needed.

The pandemic has not prevented continued development and improvement of our services. Work on a new Housing Management System proceeded at pace during 2020. Once live next year, this will reduce paperwork, improve data quality and free up our team to spend more time with customers.

In line with the General Synod environment motion in February 2020, the Board commissioned an assessment of the technologies, costs and practical steps to achieve climate transition in its housing portfolio. The results of this work will feed into the development of the asset management strategy.

During the year the Board undertook a review of its housing and charitable services. This considered the future demand for housing services, the nature of the services offered and how these can be refined in

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the context of the Board’s strategic priorities of simplification, great conversations, and moving towards self-sufficiency. Aspects of the review will be taken forward in 2021 and subsequent years, starting with simplification of the discretionary grants made by the Board.

Administration of Pensions

During 2020 the Board undertook the triennial valuations of the CWPF and CAPF, both based on valuation date of 31 December 2019, and a statutory date for completion of 31 March 2021. The Board carefully considered The Pensions Regulator’s guidance on valuations during the pandemic as part of the valuation work. Both valuations benefited from engagement before and during the valuation process with employers, leading to the agreement of long-term funding and derisking journey plans for both schemes.

We continued the implementation of an upgrade to the Board’s pension administration system. The Board first implemented its pensions administration software 15 years ago. The system has provided considerable resilience through the pandemic, with staff able to maintain service levels whilst working remotely from the office. The system improvements we are now implementing will further enhance the service, including through:

The first phases of this project will go live in 2021.

During 2020 we reduced the number of legacy Additional Voluntary Contributions (AVCs) providers, simplifying arrangements for members.

In 2021, we will formally conclude the actuarial valuations of the CWPF and CAPF schemes, and prepare for the next valuation of the CEFPS, which has a valuation date of 31 December 2021.

The total assets of the defined benefit pension schemes for which the Board is Trustee returned 9.4% over 2020[2] (2019: 15.5%). For the fifteen years to the end of 2020, annualised returns are 8.7%.

The results of the schemes are not reflected in those of the Board and may be found in the separate annual report and accounts produced for each scheme. The table below provides summary information for the net assets of each scheme as at 31 December 2020:

2 This excludes the return on investment assets within the Defined Contribution sections of the schemes.

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Church of England
Funded Pension
Scheme
£m		 Church Workers
Pension Fund
£m		 Church
Administrators
Pension Fund
£m		 Total
£m
Total net assets
available for 2,411 653 188 3,252
benefits

The table below provides summary information for the most recent concluded actuarial valuation of each pension scheme at the date indicated:

Church of England
Funded Pension Scheme
£m		 Church Workers
Pension Fund
£m		 Church Administrators
Pension Fund
£m
Date of Valuation 31 Dec 2018 31 Dec 2019 31 Dec 2019
Total Technical
Provisions		 (1,868) (611) (151)
Total net assets
available for benefits		 1,818 601 142
Total pension scheme (50) (10) (9)
deficit

In line with its agreed long-term asset allocation, the Board continued its programme of diversifying the assets and sources of return for the pension schemes during the year, particularly through commitments to private market and alternative investments. This additional diversification partly mitigated the volatility in equity and gilt markets throughout the year. The Board is a long-term investor well able to ride out market volatility. Our long-term plan envisages both restructuring and reducing public equity investments as a share of the total, with further investments in private markets and other assets. We can do this because, overall, our schemes are continuing to grow and are some years from maturity. This will further diversify our growth portfolio and directly supports our ethical investment agenda, by allowing us to invest in areas such as renewable energy, energy efficiency, environmental wellbeing, and technology.

Further development of our asset allocation will continue throughout 2021, supported by ongoing risk analysis.

The Board’s Approach to Ethical Investment & Stewardship

The Board is a leading voice in ethical and responsible investment. It is globally recognised and respected for its work. The Board actively engages with companies in which it is invested and is committed to managing its funds in a way that reflects the Church’s teaching and values. The Board is the only pension provider offering schemes that fully comply with the Church of England’s ethical investment policies.

Climate change is the biggest risk investors face. Both an ethical and financial issue, it remains a major focus of our engagement with companies, and shapes our investment approach.

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We continue to co-chair the Transition Pathway Initiative (TPI) with the Environment Agency Pension Fund. TPI offers investors a robust approach to assessing companies’ preparedness for transition to a low carbon economy, and is backed 93 other investors with over $22 trillion in assets under management.

In 2020, insights from TPI were embedded within a new market index – the FTSE-TPI Climate Transition Index. Developed with FTSE Russell and the London School of Economics Grantham Research Institute, this index is the first in the world to consider what targets a company has (or has not) set in support of the Goals of the Paris Agreement, adjusting investment in those companies accordingly. By the end of 2020, the Board had over £800m of investments allocated to the index. The development of the index was recognised as ‘ESG Incorporation Initiative of the year’ by the UN-backed Principles for Responsible Investment (PRI), in their 2020 awards.

We collaborate with other pension funds and investors globally to collectively drive action on climate change. With Dutch Fund APG, we co-created the first Global Net Zero Investment Framework. This provides a practical blueprint for pension funds to tackle climate change and achieve net zero emissions globally by 2050. On behalf of the Climate Action 100+ global engagement initiative (supported by funds with $51 trillion of assets) we led engagement with Royal Dutch Shell to secure the most comprehensive commitment from an oil and gas major to align to the goal of net zero.

In the autumn of 2020, we received the results of independent assessment of the pension funds resilience to different climate scenarios. This confirmed the Board is in good shape, particularly following the adoption of the FTSE TPI Climate Transition Index, which has delivered lower carbon intensity and greater exposure to green revenues in the portfolio. In 2021 we will be expanding our approach to other asset classes.

The Board has continued to lead the Church’s engagement with mining and extractives industry, coordinating the investor response to the Brumadinho tailings dam disaster in 2019. As a direct result, the first ever global industry safety standard on tailings (waste) dams was launched in August 2020, supported by investors, the UN, and the world’s largest leading mining companies. At the end of 2020, a further partnership was announced between the UN, the Council on Ethics of the Swedish National Pension Funds and the Board to establish an independent international institute to implement the global tailings standard. The Mining & Tailings Safety Initiative was recognised as the most impactful investor engagement through the PRI award of ‘Stewardship project of the year.’

We are guided in our engagement activities by the advice from the Church’s Ethical Investment Advisory Group (EIAG). Ethical policies and guidance across 18 areas advise exclusions on certain kinds of investments such as tobacco, gambling, high rate lending, or support a mixture of ethical exclusions alongside engagement to change company behaviour. Aligned with our climate change policy, we also restrict investments in companies generating more than 10% of revenues from thermal coal and tar sands. The Board’s approach to ethical and responsible investing is further described in our first annual stewardship report, which may be found at www.churchofengland.org/cepb.

In our policies and engagement with companies, we coordinate closely with the other National Investing Bodies, the Church Commissioners and CBF Church of England Funds.

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Financial Review

The Board’s overall result for 2020 was a net reduction in funds of £1.1m (2019: increase of £5.3m). Net expenditure before losses on investments was £0.6m (2019: net income of £4.0m). Net income in 2019 was particularly high due to the recognition of a one-off legacy of £5.2m.

Total income for 2020 was £29.1m (2019: £35.1m), with income from charitable activities being £21.0m (2019: £20.5m), which includes income from rents and service charges for CHARM properties and the supported housing schemes along with interest received in relation to mortgage properties, which together amount to £13.7m (2019: £13.6m). The remaining income from charitable activities of £7.4m (2019: £6.9m) relates to the recovery of administrative costs in respect of the pension schemes administered by the Board.

In addition to the income received through provision of its services, the Board relies upon voluntary income sources to sustain its charitable activities. Income from grants, donations and legacies was £6.2m (2019: £10.9m). This includes support from the wider Church of England, through Vote 5 of the Archbishops’ Council’s budget, under which a grant of £5.3m (2019: £5.0m) was made towards the provision of retirement housing. Total income from donations and legacies in 2020 was £0.9m (2019: £5.9m) for which the Board is extremely grateful.

The Board also received investment income of £1.4m (2019: £1.6m), and profit from the sale of CHARM properties of £0.5m (7 rental and 1 shared ownership) (2019: £2.1m, 19 rental and 6 shared ownership). The Board continues to develop the portfolio through sale of unsuitable properties as they become vacant, using the proceeds of sale, along with external borrowing, to fund the purchase of new properties; however the Board carefully managed both sales and purchases in the year given the impact of Covid on the Housing market, customer decisions and choices in the context of the pandemic and wider uncertainty.

Total expenditure for 2020 totalled £29.7m (2019: £31.1m), with expenditure on charitable activities totalling £29.7m (2019: £31.1m). The largest component of expenditure was on rental properties of £13.2m (2019: £14.9m). Expenditure on supported housing was £4.9m (2019: £5.4m). Expenditure was monitored carefully in the wake of the pandemic, with certain expenditures such as property improvement works running at lower levels than a typical year through choice (to mitigate other unplanned costs) or necessity (Covid restrictions).

Charitable expenditure also includes the cost of administering the pension schemes which was £7.4m (2019: £6.9m) – this is a figure which varies year to year in large part due to the level of work on statutory valuations within the year.

Net losses of £0.5m on investment funds (2019: gains of £1.3m), explained further below, contributed to an overall decrease in total funds of £1.1m to £127.8m (2019: £128.9 m).

The value of fixed assets increased in the year to £301.8m (2019: £301.3m). The overall value of the CHARM portfolio increased by £0.5m, reflecting acquisitions and disposals in the year, whilst the value of CEPB funded properties increased to £179.0m (2019: £175.0m) largely driven by the increase in CEPBfunded rental housing stock in the year (with 18 additions in 2020 versus 7 disposals).

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The Board’s pension deficit liability in relation to its participation in the CAPF scheme was £0.6m at the end of 2020 (2019: £0.8m). At the end of 2020 the Board paid, in full, its assessed CWPF 2019 valuation deficit.

External financing

The Board has supported the long-term financing of the CHARM scheme through the issue of two listed bonds, as well as making use of a Revolving Credit Facility.

During 2015 the Board issued a £100m Bond, of which £70m was drawn down immediately. This gave the Board access to long-term finance to purchase additional retirement properties, to secure the future of clergy housing in retirement. The Board used part of the proceeds to acquire the further economic interest in 196 CHARM rental properties which had been financed by the Church Commissioners and had previously been subject to significant restrictions. The remaining proceeds were used to repay other existing, shorter-term, borrowings.

In 2018, the Board issued a new £50m fixed rate bond in April 2018, of which £30m was drawn down immediately and was predominantly used to repay existing borrowings. This reflects the continuation of the Board’s long-term financing strategy.

In 2019, the Board agreed a variation to its £50m Revolving Credit Facility, extending this arrangement to 2025.

Charity Investments

The charity holds investments of £41.7m (2019: £42.3m), which generated income of £1.4m in the year (2019: £1.6m).

During 2020 the majority of investments were held with Brewin Dolphin, the Charities Property Fund (CPF, managed by Savills) and the Property Income Trust for Charities (PITCH, managed by Mayfair Capital). The CPF and PITCH funds invest wholly in UK property, principally industrial, office and retail property. They are structured as charity common investment funds, which allow investing charities to benefit from their statutory exemption from stamp duty on UK investments. The charity also holds £0.7m (2019: £0.7m) in investment properties, covering a portfolio of 6 (2019: 6) properties.

The amounts invested at the end of 2020 by the Board across the three funds are shown in the table below, along with the return generated by each investment for the Board over the year. At times, the Board’s returns may differ from the funds’ own returns, because of investment or disinvestment during the year, which will affect its returns.

The Board monitored its charitable investments carefully during 2020 in the light of the pandemic, and will continue to review the charity investment strategy in 2021.

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Value at end Allocation 2020 Return
2020 for the Board
£m % %
Brewin Dolphin 12.9 31% 6.6
Investment Properties 0.7 2% 8.6
Savills Charities PropertyFund 20.0 48% 1.3
Mayfair Capital PropertyIncome Trust for Charities 8.1 19% (1.6)
Total 41.7 100% 2.4

The charity also holds £1.4m (2019: £1.4m) in short-term cash deposits with the CBF Deposit Fund (CBFDF, managed by CCLA Management Ltd).

Further information about the two charity property funds in which the Board is invested is provided below.

below.
Fund returns net of fees Yield Net fund size
2020 2018-2020 2016-2020 End 2020 End 2020
% %p.a. %p.a. % £m
Savills CharityPropertyFund 1.3 3.5 5.3 4.6 1,186
Mayfair Capital Property
Income Trust for Charities		 (1.6) 3.0 5.3 4.6 568

Risk Management

The Church of England Pensions Board’s risk management process supports management by facilitating the identification and assessment of significant risks to the achievement of objectives. There is a clearly defined Risk Management Policy which outlines the roles and responsibilities of Trustees, management, and staff.

The Trustee Board reviews the strategic risk register and risk management arrangements at least annually. The Board and its Sub-Committees closely monitor key strategic risks throughout the year, as meeting agendas are focused upon the delivery of these objectives. The Board is supported by the Audit and Risk Committee, which regularly reviews the risk registers and seeks assurance over the adequacy of arrangements in place to manage the risks. The Board has considered its appetite for different types of risk, and seeks assurance that additional actions are planned where residual risk is assessed to exceed the stated appetite. The Board recognises that fulfilment of certain Pension Trustee and charitable duties requires a measure of risk taking, for example to deliver investment returns for members, and seeks to ensure that such activities are undertaken within an appropriate control environment.

Individual departments and identified risk owners are responsible for the identification, assessment and review of risks in their area of responsibility. Risks are prioritised using an agreed scoring methodology and are assessed at an inherent and residual level. The risk management process is facilitated and monitored by the Risk and Assurance function. The management of key risks are subject to independent review and assurance through the internal audit process, which reports to the Audit and Risk Committee.

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Principal Risks

The principal risks, which Trustees consider most significant are –

Risk Key Management Actions
Significant wider socio-economic
issues resulting from events [inc.
COVID-19 and Brexit], have a major
impact on pension deficits or
covenants on external financing.		 • Regular monitoring and reporting of the external
environment and scenario analysis.
• Diversification of the investment portfolio.
• Adoption of Asset Led Funding methodology for the CEFPS.
• Engagement with scheme funders / employers.
• Employer covenant monitoring arrangements.
• Debt covenant monitoring arrangements.
• Customer engagement.
• Annual actuarial review.
• COVID19 Response Plan.
Failure to meet customer needs
and expectations in the context of
the expected significant increase in
retirements		 • Encouraging early customer engagement.
• Scenario modelling and demand surveys.
• New process to match prospective customers with CHARM
properties.
Failure to comply with Landlord
regulatory responsibilities resulting
in injury or death to individuals		 • Landlord responsibilities identified.
• Specific arrangements in place for Supported Housing,
including third party support.
• Compliance actions for CHARM properties delivered by a
range of third-party providers, managed and monitored by
inhouse Compliance Manager.
• Specific COVID19 planning undertaken.
Covenant(s) materially weakened
by a significant event within the
church leading to financial strain		 • Covenant monitoring and integrated risk management.
• Close liaison with Archbishops' Council on wider church
financial issues, particularly during the pandemic.
• Horizon scanning and ad-hoc simulation or scenario
planning.
• Close liaison with employers.
Legal or regulatory change
resulting in a pension scheme or
housing operations becoming
unviable, unacceptable to
employers,or unaffordable.		 • Horizon scanning.
• Engage with regulatory bodies and policy makers.
• Ethics & Engagement programme.
CWPF Pension Builder sections
become untenable.		 • Advice from the Scheme Actuary combined with developed
policies for each section.

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Risk Key Management Actions
Failure to understand and respond
to the paradigm shifts caused by
climate change		 • Climate change integrated into investment decision
making. Independent climate scenario analysis completed
in 2020.
• Property purchases consider climate and flood risk
Failure to deliver strategic
objectives in event of a major
business continuity event		 • Testing of business continuity plans across NCIs.
• Cyber resilience and Technology strategy, including Cyber
Essentials Plus certification.
• Defined Health and Safety procedures

With the unfolding pandemic during 2020, the Board and management paid particularly close attention to risk management and developed new mitigations appropriate to the circumstances. For example, additional procedures were introduced to manage infection risks in housing activities, and there was close liaison with other NCIs on the financial measures they were putting in place to support church bodies. The Board also implemented pre-prepared contingency plans for its operations. Risk scores increased in a number of areas at the outset of the pandemic before coming down later in the year as these additional mitigations and actions were implemented.

Going Concern

The Board meets the cost of property purchases, fit-outs and other working capital requirements through its external borrowing, comprising a bank facility and two listed bond issues. The Board prepares annual budgets and regular re-forecasts, along with a three-year financial plan in order to ensure that it can meet its spending commitments as they fall due, and fulfil the terms and conditions associated with external borrowing. In addition, the Board has also prepared a long-term business plan to consider financial viability over a longer period than that for which formal budgets and forecasts are prepared.

The Board has considered the key risks and uncertainties which impact upon immediate liquidity and longer term solvency. These include the level of anticipated demand for its services, the resilience of voluntary income streams and changes in economic conditions. It has modelled the impact of changes in these factors over time, and has considered whether it has adequate reserves and appropriate contingency plans to deal with a range of potential adverse scenarios.

The Board has considered the continuing impact of the COVID-19 pandemic on its operations, particularly with reference to the contingency plans it has put in place to respond to the emergency and the impact of delayed activity (including property acquisition and non-essential maintenance) on its future obligations and commitments.

Having due regard to the above, the trustees have reasonable expectation that the Board has adequate resources to meet its spending commitments as they fall due, including the servicing and repayment of debt and compliance with loan covenants for the foreseeable future. Accordingly, the going concern basis of accounting in preparing the annual report and accounts continues to be adopted.

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Approach to Taxation

In conducting its tax affairs, the Board will:

Reserves

Unrestricted funds

The unrestricted funds represent expenditure incurred by the Board on salaries and working expenses subsequently recovered from the pension funds administered by the Board. The Board has no net assets in its own right as a body corporate and, consequently, no unrestricted reserves are retained.

Restricted funds

Restricted income funds are to be spent or applied within a reasonable period from their receipt to further one or more, but not all of the charity’s charitable purposes.

The largest restricted fund administered by the Board is the General Purposes Fund (“GPF”) at £116.1m (2019: £117.7m), which exists to provide for the relief of poverty among, and housing for retired clergy and church workers and their spouses/former spouses/dependants etc. This fund is considered to be restricted since the provisions for use of its resources are narrower than the statutory objects of the Board, which include the administration of pensions.

Within the GPF, the Board has earmarked funds of £6.6m (2019: £7.8m) for the provision of future property maintenance costs. The designation of this fund merely expresses the current intentions of the Trustees and has no legal effect. Legally, the funds are available for spending on any of the objects of the GPF.

The Clergy Retirement Housing Trust (“CRHT”) is a registered charity and is a linked charity of the Board (Charity No. 236627-2). The CRHT may use its property as residences for qualified persons under the

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provisions of the Clergy Pensions Measure 1961 or any succeeding legislation. As a linked charity, it is accounted for as a separate restricted fund, which together with some smaller trusts is valued at £12.0m (2019: £12.0m).

Reserves policy

Reserves are held to ensure that the Board can continue to deliver services to its beneficiaries and to meet its obligations and covenants in respect of debt financing in the event of a sustained reduction in voluntary income or other adverse scenario. The Board considers annually the level of reserves that should be maintained and takes account of the requirements of the Charities SORP and the guidance issued by the Charity Commission (Charities and reserves CC19).

Whilst it is unusual for a charity to hold reserves entirely within restricted funds, in practice the breadth of the restriction placed on the General Purposes Fund means that the trustees have a reasonable expectation that they could meet all necessary charitable expenditure of the Board from this fund, excluding the administration of pensions, the cost of which is fully recoverable from the Schemes.

For the purposes of defining an appropriate reserves policy, the Board therefore considers ‘free reserves’ to be the net assets of the General Purposes Fund after excluding:

The Board holds free reserves in the region of £35m - £40m, allowing it to generate annual investment income in the region of £1.5m - £2m whilst taking an investment approach which aims to preserve capital value. This level of reserve also gives considerable cover in the case of a one-off significant financial stress event.

The Trustees have again considered the reserves policy in light of the COVID-19 pandemic and the impact on the Board’s activities as well as the wider economy, and believe it continues to be appropriate. Therefore no changes have been made.

Plans for the future

The Pensions Board has been providing retirement services to the Church of England for over 90 years. These services have changed over the years and will continue to develop to ensure that the needs of its customers are met. The Board will continue to regularly review these services using the information obtained from an understanding of its customers’ needs and expectations, to improve delivery, whilst demonstrating value for money to those who provide the Board with the resources to operate. It will also continue to provide a working environment which motivates and develops its people to give of their best and take pride in working for the Church of England Pensions Board.

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Our core work will continue to be serving a growing population of 41,000 pension scheme members and beneficiaries and 2,700 housing residents, plus working with partner employers and responsible bodies across the Church of England. This includes managing health and safety, regulatory compliance and performance monitoring.

In December 2019 the Board adopted three strategic priorities: simplification, engaging in great conversations, and seeking to become more self-sufficient over the long term. These priorities – which resonate strongly with the emerging vision for the Church of England – are manifest in various parts of our plan.

Specific activities in our Delivery Plan for 2021 include:

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Structure, governance and management

Governance

Members of the Board represent a balance of skills and expertise and are drawn from a wide range of constituencies. Following changes to the legislation affecting the membership of the Board in 2017, of the 20 trustees, seven are elected by the various Houses of the General Synod and five by the members or the employers participating in the pension schemes for lay workers. One is appointed by the Church Commissioners and seven are appointed by the Archbishops of Canterbury and York, after consultation, including the Chair whose appointment is approved by General Synod. A period of membership lasts for six years; retiring members may offer themselves for re-election or be reappointed.

From 1 July 2021, the provisions of the Legislative Reform Order come into effect. This reduces the size of the Board from 20 members to 12. The Chair remains an appointment of the Archbishops with the approval of Synod. There will be four member nominated trustees, two drawn from the clergy schemes and one each from the CWPF and CAPF. One member shall be elected by the CAPF and/or CWPF employers and one appointed by the Archbishops following consultation with the Commissioners and dioceses, as a proxy for the clergy ‘employers’. The remaining members will be formally appointees of the Archbishops for their skills and expertise following an open process and appropriate consultations.

The Board decides on the frequency of its meetings, which is typically five a year. For Board meetings a quorum is present when six people are in attendance, including at least two persons elected by the members of the pension schemes administered by the Board. From 1 July 2021 the quorum will be four.

New trustees receive an induction into the work and practices of the organisation. All have access to an online database which includes outlines of their responsibilities, copies of the Rules and other documentation for each pension scheme, policies relating to the provision and operation of retirement housing assistance, and a library of past Board and committee papers.

Members of the Board have completed either fully or partially the Pensions Regulator’s Trustee Toolkit, or an equivalent qualification, and regular training sessions are provided at Board meetings on a range of subject areas. In 2020 trustee training topics included Landlord responsibilities, various ethical investment issues, and the implications of the Competition and Markets Authority Order.

The Board has committees to oversee the following areas: Audit and Risk, Housing, Investment, and Pensions. The Board has delegated authority to make decisions concerning these areas within its terms of reference and to make recommendations to the full Pension Board on other matters.

The Board has also delegated some of the day-to-day management and operation of the schemes’ affairs to professional organisations as set out on page 28.

Independent Auditors

During the year, there have not been any non-audit services performed by the external auditors Crowe U.K. LLP.

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Ethical Investment

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

The Charity Code of Governance

The Church of England Pensions Board takes its governance responsibilities seriously and, as a large charity, aims to have a governance framework that is fit for purpose, compliant and efficient. In 2017 the new Charity Code of Governance was launched, with a recommendation that charities review their level of application and to explain any aspects of the code they were not applying. In our review, we carried out a detailed examination of each element of the code:

Our review found we apply the code with a few exceptions, mainly arising from the Governing documentation, which as a statutory corporation, is itself primary legislation. The main area where we differed from the recommendations related to the limitation of trustee terms. On 1 July 2021, the Legislative Reform Order comes into effect. This reduces trustees’ terms from six years to five and provides that no trustee may serve more than ten years. This differs slightly from the recommendation in the Code of nine years because of the overriding need to provide a measure of continuity through triennial pension scheme valuation cycles.

In recent years, the Board has also enhanced its compliance with the Code. These have included extending the gathering of feedback from customers, consideration of extending the aspects of diversity we monitor, and through a thorough review of our charitable services.

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Trustees

The Board has members elected and appointed by various means, which are described below. It delegates some of its business and decision making to sub-committees.

Board members (1 January 2020 to 29 June 2021)

Appointed with the approval of the General Synod, by the Archbishops of Canterbury and York Clive Mather (Chair)

Elected by the House of Clergy of the General Synod

The Revd Fr Paul Benfield The Revd Nigel Bourne The Revd Peter Ould The Ven David Stanton

Appointed by the Archbishops of Canterbury and York

Canon Nicolete Fisher

Elected by the House of Laity of the General Synod

Roger Boulton FIA Canon Emma Osborne Bill Seddon

Appointed by the Archbishops of Canterbury and York after consultation with the representatives of the dioceses Nikesh Patel

Elected by the members of the Church Workers Pension Fund

Susan Pope Michaela Southworth

Appointed by the Archbishops of Canterbury and York after consultation with the Chairs of the Church of England Appointments Committee and the General Synod’s House of Laity

Elected by the members of the Church Administrators Pension Fund

Maggie Rodger

Tony King The Revd Caroline Titley Ian Wilson (from September 2020)

Appointed by the Church Commissioners Jeremy Clack FIA (to December 2020)

Elected by the House of Bishops of the General Synod

The Rt Revd Alan Wilson, Bishop of Buckingham

Elected by the Employers in the Church Workers Pension Fund and the Church Administrators Pension Fund Richard Hubbard Canon Sandra Newton

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Committee Members (as at 29 June 2021)

Audit and Risk Committee

Pensions Committee

Maggie Rodger (Chair) Richard Hubbard (to September 2020) The Revd Peter Ould Susan Pope (from March 2020) Ian Wilson (from September 2020) Helen Ashley Taylor Caron Bradshaw OBE

Richard Hubbard (Chair) The Revd Fr Paul Benfield The Revd Nigel Bourne Maggie Rodger Michaela Southworth (from March 2020)

Housing Committee

Investment Committee

Canon Sandra Newton (Chair) Roger Boulton FIA (Chair from January 2020) Canon Nicolete Fisher Jeremy Clack FIA (to December 2020) Tony King (from March 2020) Canon Emma Osborne The Revd Caroline Titley Nikesh Patel The Rt Revd Alan Wilson Bill Seddon Jonathan Gregory Matthew Beesley Tom Paul (from March 2020) Deb Clarke (to December 2020) Lawrence Santcross Jonathan Rogers

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Attendance by Trustees at meetings of the Board and its Committees

The table below sets out the attendance of trustees at meetings of the Board and its Committee during 2020. Where a member served for part of the year, the number of meetings that they could have attended is shown in brackets.

Trustee Board Audit and Housing Investment Pensions
Risk
(6) (3) (4) (5) (4)
Clive Mather (Chair) 6 4 5 4
The Revd Fr Paul Benfield 5 4
Roger Boulton 5 5
The Revd Nigel Bourne 5 4
Jeremy Clack 2 2
Canon Nicolete Fisher 5 4
Richard Hubbard 6 2(2) Obs 1 mtg 4
Tony King 6 4
Canon Sandra Newton 5 4
Canon Emma Osborne 6 5
The Revd Peter Ould 4 3
Nikesh Patel 5 4
Canon Susan Pope 6 2(2)
Maggie Rodger 5 3 4
Bill Seddon 5 5
Michaela Southworth 6 4
The Ven David Stanton 1
The Revd Caroline Titley 6 4
The Rt Revd Alan Wilson 5 4
Ian Wilson 2(2) 0(1) Obs 1 mtg

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Reference and administrative information

Charity number 236627 Principal office Church House, 29 Great Smith Street, London, SW1P 3PS Chief Executive John Ball MA(Oxon), MSc Actuary Aaron Punwani, Lane Clark and Peacock LLP Independent auditor Crowe U.K. LLP Bankers Lloyds Bank Corporate financial advisor Traderisks Ltd Investment Advisers Mercer Ltd Charity Investment Managers Brewin Dolphin Savills Investment Management Ltd Mayfair Capital Investment Management Ltd CCLA Investment Management Limited

Enquiries

Enquiries should be addressed to:

Post: Church of England Pensions Board, PO Box 2026, Pershore, WR10 9BW Email: cepbfeedback@churchofengland.org Phone: 020 7898 1890

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Management

The day-to-day management of the Board’s activities is delegated to the Executive Team, which is led by the Chief Executive.

Staff Remuneration and Executive Pay

Other than staff employed to work in the supported housing schemes, all staff in the Pensions Board, and those working for Church of England Central Services who provide support functions to the Board, are covered by a unified pay policy that operates across all the National Church Institutions. The policy is designed to ensure the same level of pay for all staff in posts with work of equal value which is based on a comprehensive job evaluation scheme, with staff being placed in one of eight ‘bands’. For certain staff with specialist skills, typically those whose role requires them to hold a professional qualification, a market adjustment may be applied, the value of which is determined by reference to the lower quartile and median of market related salaries and is subject to annual review. The NCIs use a range of appropriate external data tools and internal dedicated resource to advise on market rates.

Staff pay is reviewed annually and any increases as a result of the annual pay negotiations are awarded with effect from 1 January each year.

Certain senior roles, including that of the Chief Executives, sit outside the banding system, as the skill set required to fulfil the role is not readily measured within the NCIs’ standard job evaluation system. Salaries for these roles are set individually with reference to the wider market place, typically comparing to the charity and public sector market, and is overseen by the Remuneration Committee comprising senior trustees from each of the main NCIs. In general, these staff can expect the same percentage annual uplift for cost of living as the rest of the staff enjoy.

The annual salary for the highest paid member of staff was £147,000 (2019: £143,000), 13 (2019: 13) times the salary earned by the lowest paid member of staff and 4 (2019: 5) times the median salary.

Pensions Staff employed by the National Church Institutions are eligible to join the Church Administrators Pension Fund – those whose employment commenced before July 2006 accrue pension on a defined benefit basis, and those employed subsequently are part of the defined contribution section with employer contribution rates ranging from 8% to 18% depending on the age of the employee and any personal contribution that they make.

Staff employed by the Board directly, mainly in the supported housing schemes, are eligible to join the Church Workers Pension Fund.

In common with the other National Church Institutions, the Pensions Board became an accredited with the Living Wage Foundation in October 2019. This formalised an extant commitment.

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Approval

The Trustees Report was approved by the Trustees on 29 June 2021 and signed on its behalf by:

Clive Mather Chair

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Statement of Trustees’ responsibilities in relation to the financial statements

The trustees are responsible for preparing the Trustees’ Annual Report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

The law applicable to charities in England and Wales requires the trustees to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the charity and of the incoming resources and application of resources of the charity for that period.

In preparing these financial statements, the trustees are required to:

The trustees are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the charity and enable them to ensure that the financial statements comply with the Charities Act 2011, the Charity (Accounts and Reports) Regulations 2008. They are also responsible for safeguarding the assets of the charity and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The trustees are responsible for the maintenance and integrity of the charity and financial information included on the charity’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions

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Independent auditor’s report to the Church of England Pensions Board

Opinion

We have audited the financial statements of The Church of England Pensions Board (the “Parent Charity”) and its subsidiaries (the “Group”) for the year ended 31 December 2020, which comprise:

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Trustees’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Trustees’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included reviewing the detailed paper prepared by management setting out their assessment of the Board’s ability to continue as a going concern. The assessment covers the period to 31 December 2023.

We have discussed this with the Board’s management in order to fully understand their assessment including the underlying assumptions applied.

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In addition to this we have:

We have no further observations arising from that evaluation.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Trustees with respect to going concern are described in the relevant sections of this report.

Overview of our audit approach

Materiality

In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified.

Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £3m, based on 1% of the Group’s total assets.

We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control environment.

Where considered appropriate, performance materiality may be reduced to a lower level, such as for related party transactions.

We agreed with the Audit and Risk Committee to report to it all identified errors in excess of £150k. Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.

Overview of the scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the trustees made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.

We gained an understanding of the legal and regulatory framework applicable to the group and the industry in which it operates and considered the risk of acts by the Group which were contrary to

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applicable laws and regulations, including fraud. We designed audit procedures at Group and component level to respond to the risks, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

We focused on laws and regulations that could give rise to a material misstatement in the group and charity financial statements. Our tests included, but were not limited to, the review of financial statement disclosures, enquiries of management and review of internal audit reports in so far as they related to the financial statements. There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.

We did not identify any key audit matters relating to irregularities, including fraud. We also addressed the risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the trustees that represented a risk of material misstatement due to fraud.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

Key audit matter How the scope of our audit addressed the key audit matter Going concern Our observations on going concern are included in the “Conclusions related to going concern” section of this report. Fixed asset impairment assessment We reviewed management’s overall impairment The Group holds significant levels assessment and performed our own audit work on of property assets with a total of the process, agreeing items to supporting evidence £235.4m held at 31 December where possible including verification of the house 2020. price indices used within the impairment model to third party documentation.

These properties are classed as programme related investments In addition to this, for a sample of individual since they generate income in properties we compared the property’s carrying furtherance of the Group’s value to the sale value of any similar properties in charitable objectives. As such, the same area. these properties are not revalued Following this work, we have determined that it is and are rather held at cost with an appropriate that no impairment charge is annual review for potential recognised in relation to the Board’s properties held impairment. at 31 December 2020.

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Each year-end, management perform a full impairment review which considers whether any properties within the portfolio should be impaired. This review utilises a range of valuation sources and applies a significant element of management judgment.

Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to enable us to express an opinion on these matters individually and we express no such opinion.

Other information

The trustees are responsible for the other information. The other information comprises the information included in the trustees’ annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Trustees' Report

Under the Charities Act 2011 we are required to report to you if, in our opinion the information given in the Trustees’ Report is inconsistent in any material respect with the financial statements. We have no exceptions to report arising from this responsibility.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which the Charities (Accounts and Reports) Regulations 2008 require us to report to you if, in our opinion:

Responsibilities of the trustees for the financial statements

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As explained more fully in the trustees’ responsibilities statement set out on page 31, the trustees are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the trustees determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the trustees are responsible for assessing the group’s and the parent charity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the trustees either intend to liquidate the charity or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Other matters which we are required to address

In preparing the financial statements, the trustees are responsible for assessing the group’s and the parent charity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the trustees either intend to liquidate the charity or to cease operations, or have no realistic alternative but to do so.

Use of our report

This report is made solely to the charity’s trustees, as a body, in accordance with Part 4 of the Charities (Accounts and Reports) Regulations 2008. Our audit work has been undertaken so that we might state to the charity’s trustees those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charity and the charity’s trustees as a body, for our audit work, for this report, or for the opinions we have formed.

Crowe U.K. LLP

Statutory Auditor

London

Date 30 July 2021

36

Consolidated statement of financial activities of the Church of England Pensions Board for the year ended 31 December 2020

Note
Income from:
Grants, donations and legacies
2
Investment income
3
Charitable activities
4
Other income: gain on sale of fixed assets		 2020
Unrestricted
funds
Restricted
funds
Total
£’000
£’000
£’000
-
6,172
6,172
-
1,385
1,385
7,367
13,675
21,042
-
479
479
7,367
21,711
29,078
(7,367)
(22,267)
(29,634)
-
(49)
(49)
-
(7,367)
(22,316)
(29,683)
-
(605)
(605)
-
(468)
(468)
-
(1,073)
(1,073)
-
(18)
(18)
-
(18)
(18)
-
-
-
-
(1,091)
(1,091)
-
128,925
128,925
-
(1,091)
(1,091)
-
127,834
127,834		 2019
Unrestricted
funds
Restricted
funds
Total
£’000
£’000
£’000
-
10,879
10,879
-
1,616
1,616
6,883
13,630
20,513
-
2,116
2,116
Total income 6,883
28,241
35,124
Expenditure on:
Charitable activities
4
Raising funds
5		 (6,883)
(24,199)
(31,082)
-
(23)
(23)
Total expenditure (6,883)
(24,222)
(31,105)
Total income less expenditure before gain on -
4,019
4,019
investments
Net (loss) / gain on investments
9		 -
1,316
1,316
Net (expenditure) / income -
5,335
5,335
Other recognised gains and (losses)
Other (losses): adjustment to pension
provision
8		 -
(79)
(79)
Total other gains -
(79)
(79)
Transfers between funds
15		 -
-
-
Net movement in funds -
5,256
5,256
RECONCILIATION OF FUNDS
Total funds brought forward at 1 January
Net movement in funds in year		 -
123,669
123,669
-
5,256
5,256
Total funds carried forward at 31 December
15		 -
128,925
128,925

The income, expenditure and other recognised gains and losses all relate to continuing operations, none of which have been acquired during the year.

The notes on pages 41 to 58 form part of these financial statements.

Note – all figures within the consolidated statement of financial activities are the same as for the charity-only statement of financial activities.

37

Consolidated balance sheet of the Church of England Pensions Board as at 31 December 2020

Note
FIXED ASSETS
Investment assets
9
Tangible assets - supported housing and IT
10
Tangible assets - CHARM
11		 £’000
Funded by
CC*
-
-
56,466		 2020
Consolidated
£’000
£’000
Funded by
CEPB
Total
41,740
41,740
24,578
24,578
179,012
235,478
245,330
301,796
1,815
1,815
1,427
1,427
4,191
4,191
7,433
7,433
(6,385)
(6,385)
(759)
(57,225)
(7,144)
(63,610)
289
(56,177)
245,619
245,619
(117,161)
(117,161)
128,458
128,458
(624)
(624)
127,834
127,834
-
-
128,458
128,458
(624)
(624)
127,834
127,834**		 2019
Consolidated
£’000
£’000
£’000
Funded by
CC
Funded by
CEPB
Total
-
42,270
42,270
-
24,053
24,053
60,011
174,961
234,972*
Total fixed assets 56,466 60,011
241,284
301,295
CURRENT ASSETS
Debtors
12
Short term deposits
Cash at bank and in hand		 -
-
-		 -
6,736
6,736
-
1,421
1,421
-
2,968
2,968
Total current assets - -
11,125
11,125
CURRENT LIABILITIES
Creditors: amounts falling due within one year
13
Loans repayable on sale of fixed assets
13		 -
(56,466)		 -
(5,352)
(5,352)
(60,011)
(758)
(60,769)
Total current liabilities (56,466) (60,011)
(6,110)
(66,121)
Net current (liabilities)/assets (56,466) (60,011)
5,015
(54,996)
Total assets less current liabilities - -
246,299
246,299
NON-CURRENT LIABILITIES
13		 - -
(116,599)
(116,599)
Net assets excluding pension provision - -
129,700
129,700
Pension deficit provision
8		 - -
(775)
(755)
NET ASSETS - -
128,925
128,925
FUNDS OF THE CHARITY
Total unrestricted funds
15
Restricted funds (excl. pension reserve)
15
Pension reserve
15
Total restricted funds
15		 -
-
-		 -
-
-
-
124,533
124,533
-
(864)
(864)
- -
123,669
123,669
TOTAL CHARITY FUNDS CARRIED FORWARD AT 31 DECEMBER - 127,834
127,834		 -
123,669
123,669

*Funded by the Church Commissioners

**Funded by the Church of England Pensions Board (See Note 11 for more details)

The notes on pages 41 to 58 form part of these financial statements.

These financial statements were approved by the trustees on 29 June 2021 and signed on their behalf by:

Clive Mather Chair

38

Charity only balance sheet of the Church of England Pensions Board as at 31 December 2020

Note
FIXED ASSETS
Investment assets
9
Tangible assets - supported housing and IT
10
Tangible assets - CHARM
11		 2020
£’000
£’000
£’000
Funded by
CC
Funded by
CEPB
Total
-
41,753
41,753
-
24,578
24,578
51,266
178,607
229,873
51,266
244,938
296,204
5,200
2,222
7,422
-
1,427
1,427
-
4,178
4,178
5,200
7,827
13,027
-
(6,385)
(6,385)
(56,466)
(759)
(57,225)
(56,466)
(7,144)
(63,610)
(51,266)
683
(50,583)
-
245,621
245,621
-
(117,161)
(117,161)
-
128,460
128,460
-
(624)
(624)
-
127,836
127,836
-
-
-
-
128,460
128,460
-
(624)
(624)
-
127,836
127,836*		 2019
£’000
£’000
£’000
Funded by
CC
Funded by
CEPB
Total
-
42,283
42,283
-
24,053
24,053
54,685
174,556
229,241*
Total fixed assets 54,685
240,892
295,577
CURRENT ASSETS
Debtors
12
Short term deposits
Cash at bank and in hand		 5,326
7,139
12,465
-
1,421
1,421
-
2,960
2,960
Total current assets 5,326
11,520
16,846
CURRENT LIABILITIES
Creditors: amounts falling due within one year
13
Loans repayable on sale of fixed assets
13		 -
(5,355)
(5,355)
(60,011)
(758)
(60,769)
Total current liabilities (60,011)
(6,113)
(66,124)
Net current (liabilities)/assets (54,685)
5,407
(49,278)
Total assets less current liabilities -
246,299
246,299
NON-CURRENT LIABILITIES
13		 -
(116,599)
(116,599)
Net assets excluding pension provision -
129,700
129,700
Pension deficit provision
8		 -
(775)
(775)
NET ASSETS -
128,925
128,925
FUNDS OF THE CHARITY
Total unrestricted funds
15
Restricted funds (excl. pension reserve)
15
Pension reserve
15
Total restricted funds
15		 -
-
-
-
129,700
129,700
-
(775)
(775)
-
128,925
128,925
TOTAL CHARITY FUNDS CARRIED FORWARD AT 31 DECEMBER -
127,836
127,836		 -
128,925
128,925

*Funded by the Church Commissioners

**Funded by the Church of England Pensions Board

The notes on pages 41 to 58 form part of these financial statements.

39

Consolidated cash flow statement of the Church of England Pensions Board for the year ended 31 December 2020

Cash flow from operating activities:
Note
Net movement in funds (as per the statement of financial activities)
Adjustments for:
Depreciation and impairment – supported housing and IT systems
10
Amortisation – Santander arrangement fee
13
Amortisation – CHARM Finance PLC bond set-up costs
13
Losses (gains) on investments
9
Dividends, interest and rents from investments
3
Gains on disposal of tangible assets – CHARM
Movement in pension liability
8
Movement in debtors
12
Movement in creditors: amounts due within less than one year
13		 2020
£’000
(1,091)
601
33
29
468
(1,385)
(479)
(151)
4,921
1,033		 2019
£’000
5,256
599
33
28
(1,316)
(1,616)
(2,116)
(89)
(4,729)
(171)
Net cash (used in) operating activities 3,979 (4,121)
Cash flow from investing activities:
Cash flows from investing activities:
Dividends, interest and rents from investments
3
Proceeds from the sale of tangible assets – CHARM properties
11
Purchase of tangible assets – CHARM properties
11
Purchase of tangible assets – supported housing
10
Proceeds from the sale of investments
9
Purchase of investments
9		 1,385
4,968
(5,282)
(1,126)
275
(338)		 1,616
10,499
(16,533)
(577)
(11,662)
12,059
Net cash generated from investing activities (118) (4,598)
Cash flows from financing activities:
Repayment of loans from Church Commissioners
13
Repayment of dioceses' share of rental properties
13
Additional (repayment to) /funding from Santander
13		 (3,544)
-
500		 (5,029)
(279)
13,500
Net cash (used in) financing activities (3,044) 8,192
Change in cash and cash equivalents in the year 817 (527)
Cash and cash equivalents at the beginning of the year 4,801 5,328
Cash and cash equivalents at the end of the year 5,618 4,801

Cash and cash equivalents and net debt comprise the following balances :

Cash and cash equivalents and net debt comprise the following balances:
At 1 January Cash Flows At 31 December
£’000 £’000 £’000
Cash at bank and in hand 2,968 1,223 4,191
Short term deposits 1,421 6 1,427
Cash held by investment manager 412 (412) 0
Total cash and cash equivalents 4,801 1,229 5,618
Bond financing (100,000) - (100,000)
Loan from Santander (17,500) (500) (18,000)
Total net debt (112,699) 729 (112,382)

The notes on pages 41 to 58 form part of these financial statements.

40

Notes to the financial statements of the Church of England Pensions Board for the year ended 31 December 2020

1. Accounting policies

a) Legal status

The Church of England Pensions Board (“the Board”) is a body corporate established in 1926 but now governed by the Church of England Pensions Measure 2018. It is a registered charity in England and Wales (Charity No. 236627) and is regulated by the Charity Commission.

The Charity’s address is: 29 Great Smith Street, London, SW1P 3PS.

b) Basis of preparation

The consolidated and charity-only financial statements have been prepared in accordance with:

The financial statements have been prepared to give a true and fair view and have departed from the Charities (Accounts and Reports) Regulations 2008 only to the extent required to provide a true and fair view. This departure has involved following Accounting and Reporting by Charities preparing their financial statements in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) rather than the Accounting and Reporting by Charities: Statement of Recommended Practice effective from 1 April 2005 which has since been withdrawn.

The Board meets the definition of a Public Benefit Entity (“PBE”) as set out in FRS 100, and therefore applies the PBE prefixed paragraphs in FRS 102.

The financial statements have been prepared on the historical cost basis (except for the revaluation of investments and where cost is deemed to be the revaluation amount at date of transition) and on the accruals basis.

The financial statements contain the financial information for the Church of England Pensions Board which is structured as follows:

A summary of the accounting policies, which have been applied consistently across the Group, is set out below.

c) Basis of consolidation

The consolidated statement of financial activities (“SOFA”) and the balance sheet include the financial information of the Board and its subsidiary undertakings (CEPB Developments Ltd, CEPB Mortgages and CHARM Finance plc). The subsidiaries have been consolidated on a line by line basis. Intragroup balances and transactions are eliminated on consolidation.

The Board has chosen not to present its non-consolidated statement of financial activities separately as the numbers are the same as for the consolidated equivalent. The Board has also taken advantage of the exemption conferred by FRS 102 Section 1 not to prepare a charity-only cash flow statement.

The Board, together with the Archbishops’ Council and the Church Commissioners are equal partners in Church of England Central Services (ChECS), a joint venture. This jointly controlled entity is included in the Board’s consolidated financial statements using the equity method. The Board’s share of profits or losses from ChECS is included in the SOFA and its share of net assets is included in the balance sheet.

d) Going concern

The Board meets the cost of property purchases, fit-outs and other working capital requirements through its external borrowing, comprising a bank facility and two listed bond issues. The Board prepares annual budgets and regular re-forecasts, along with a three-year financial plan in order to ensure that it can meet its spending commitments as they fall due, and fulfil the terms and conditions associated with external borrowing. In addition, the Board has also prepared a long-term business plan to consider financial viability over a longer period than that for which formal budgets and forecasts are prepared.

The Board has considered the key risks and uncertainties which impact upon immediate liquidity and longer term solvency. These include the level of anticipated demand for its services, the resilience of voluntary income streams and changes in economic conditions. It has modelled the impact of changes in these factors over time, and has considered whether it has adequate reserves and appropriate contingency plans to deal with a range of potential adverse scenarios.

The Board has considered the continuing impact of the COVID-19 pandemic on its operations, particularly with reference to the contingency plans it has put in place to respond to the emergency and the impact of delayed activity (including property acquisition and non-essential maintenance) on its future obligations and commitments.

Having due regard to the above, the trustees have reasonable expectation that the Board has adequate resources to meet its spending commitments as they fall due, including the servicing and repayment of debt and compliance with loan covenants for the foreseeable future. Accordingly, the going concern basis of accounting in preparing the annual report and accounts continues to be adopted.

e) Income

All income is recognised once the Board has entitlement to the income, it is probable that the income will be received and the amount of income receivable can be measured reliably.

i) Grants, donations and legacies

Donations are accounted for when received. Grants are recognised when the Board is entitled to receive them and revenue recognition criteria of entitlement, probability and measurement have been met. Gift Aid receivable is included in income when there is a valid declaration from the donor.

41

Notes to the financial statements of the Church of England Pensions Board for the year ended 31 December 2020

1. Accounting policies (continued)

Pecuniary legacies are recognised as receivable once probate has been granted and notification has been received. Residuary legacies are recognised as receivable once probate has been granted, where sufficient information has been received and are recognised on an estimated basis as follows: cash elements are recognised at monetary value, with property and other assets, including investments, valued at probate or net realisable value. Values are reviewed and, if material, adjusted up to the point of financial statement approval.

In the case of donated properties, these are valued at market value and recognised within Donations.

ii) Investment income

Income from investments is recognised on an accruals basis.

iii) Income from charitable activities

Income from charitable activities represents rent from rental properties, rent and service charge from shared ownership properties, income from mortgaged properties and fees and service charges from supported housing schemes, which are all recognised on the accruals basis.

iv) Other income Other income is recognised when the Board is entitled to receive it and revenue recognition criteria of entitlement, probability and measurement have been met.

f) Expenditure

All expenditure is accounted for on the accruals basis. Expenditure and liabilities are recognised when a legal or constructive obligation exists as outlined in Section 7 of FRS 102. The SOFA has been presented on an activity basis. Costs have been distinguished between charitable activities and those incurred to raise funds.

i) Charitable activities Direct costs and grants are allocated directly to activities. Grants payable are recognised when the grant is formally approved by the Board and has been communicated to the recipient.

ii) Support costs

Costs include shared service costs (finance, IT, HR, legal, internal audit), department running costs and governance costs. They are allocated across the charitable activities and raising funds as detailed in notes 4 and 5. Governance costs relate to the general running of the Board, which include costs associated with the strategic, as opposed to day-to-day, management of the Board’s activities, and compliance with constitutional and statutory requirements.

g) Pensions

Staff pensions are described in note 8. Defined benefit schemes are considered to be multi-employer schemes as described in FRS 102 paragraph 28.11 and consequently are accounted for as if they were defined contribution schemes, where employer contributions payable in the year are charged to expenditure.

Where schemes have deficit recovery contribution plans in place, FRS 102 paragraph 28.11A requires the present value of these agreed payments to be recognised as a liability. Amounts paid during the year are charged against this liability.

h) Fixed assets

Rental properties, shared ownership properties, mortgaged properties and supported housing properties generate income from the furtherance of the charity’s objects. As such, they are not considered to be investment properties but are classed as programme related investments, which under the SORP, do not need to be revalued.

Where fixed assets were purchased with significant restrictions as a result of agreements with the funder such that the Board has a right of use of the asset for the lifetime of a beneficiary of the charity but the risks and rewards relating to capital value accrue entirely to the lender, these assets are shown in a separate category. Proceeds on eventual sale of these properties are not accounted for by the Board as they are received as agent for the lender and are used to settle the corresponding liability.

i) Rental properties Properties are held at original cost or for properties received as gifts, the notional cost equivalent to the market value. Funding arrangements are explained in note 11.

Costs relating to the repair and maintenance of properties are charged to the SOFA in the year incurred.

No depreciation is charged on long leasehold or freehold properties due to the long life and the high residual value of properties which would result in immaterial depreciation for each asset and in aggregate.

An impairment review is carried out annually and where materially different from historic cost, the properties are carried at recoverable amount (being the higher of fair value less costs to sell and value in use).

ii) Shared ownership properties

These properties are purchased by the Board and the resident buys a 90-year lease for a share in the property (at least 25%) and pays a rent and a service charge on the proportion of the property that they do not own. Residents can purchase further shares in their property if their financial circumstances change, and the equity interests are adjusted accordingly.

The Board holds each property at its equity percentage of the original cost, subject to an impairment review. An impairment review is carried out annually and where materially different from historic cost, the Board’s proportion of each property is carried at recoverable amount (being the higher of fair value less costs to sell and value in use).

42

Notes to the financial statements of the Church of England Pensions Board for the year ended 31 December 2020

1. Accounting policies (continued)

No depreciation is charged on leasehold or freehold shared ownership properties due to the long life and the high residual value of properties which would result in immaterial depreciation for each asset and in aggregate.

iii) Mortgaged properties

Mortgaged properties were purchased by the Board under a scheme that closed to new business in 2008. These mortgages operate as value linked loans, where the Board’s equity interest in a property is the amount loaned to the resident (up to 95% of the property value) and the resident’s equity interest is the amount funded directly by the resident. If a resident pays off part of their loan, the equity interests are adjusted accordingly.

On the sale of a property, the Board and the resident receive proceeds in the same proportion as their equity interests.

The Board's interest is therefore classified as a tangible fixed asset and not as a financial instrument, as the rights attaching are more closely linked to the ownership of a share of a property. The Board accounts for each property at its equity percentage of original cost, subject to an impairment review. An impairment review is carried out annually and where materially different from historic cost, the Board’s proportion of each property is carried at recoverable amount (being the higher of fair value less costs to sell and value in use).

iv) Supported housing schemes and nursing home

The properties and their associated land are held at deemed cost. Freehold land is not depreciated. The buildings are depreciated.

Fixtures, fittings, plant and equipment are held at original cost to the Board less depreciation.

Depreciation is charged on the following basis:

Tangible asset Basis Rate
Freehold buildings Straight line 2.5%per annum
Fixtures, fittings, plant and equipment Straight line 5-50 years following the NHF guidelines for all
assets acquired after 2017

v) Investment properties Investment properties are held at fair value. Valuations are carried out every year in accordance with the Appraisals & Valuation Manual issued by the Royal Institute of Chartered Surveyors. No depreciation is charged.

vi) IT systems

IT systems are held at original cost to the Board less depreciation charged on a straight-line basis over 5 years. Systems are capitalised while under construction until implementation and at that stage depreciation commences.

vii) Gains (or losses) from sale of fixed assets Gains (or losses) resulting from the sale of fixed assets are recognised in income (or expenditure). Gains or losses resulting from the sale and revaluation of investment assets are recognised in the SOFA in a separate section before net income/expenditure.

i) Loans

The Board applies the measurements provisions of FRS 102 paragraphs PBE34.90-92 to all its concessionary loans. Loans from the Church Commissioners are measured at the amount received from the Commissioners. See notes 11 and 13 for more information.

The loan from Santander is a basic financial instrument and measured at transaction price (less transactions costs). Subsequently, it is measured at amortised cost using the effective interest method. Arrangement fees are deducted from the transaction price and are amortised over 15 years (July 2010 to July 2025).

The loan from CHARM Finance PLC to the Charity is a basic financial instrument and is measured at transaction price (less transactions costs). Subsequently, it is measured at amortised cost using the effective interest method. Arrangement fees are deducted from the transaction price and are amortised over the length of the facility.

The Bond liabilities relate to the corporate bonds issued by CHARM Finance PLC, and are basic financial instruments measured initially at the proceeds of issue less transaction costs directly attributable to the issue of the Bonds. After initial recognition the liabilities are measured at amortised cost using the effective interest method with transaction costs being amortised over the length of the facility.

j) Financial instruments

The Board has chosen to adopt sections 11 & 12 of FRS 102 in respect of financial instruments which are not public benefit entity concessionary loans.

Basic financial instruments

Listed and unlisted investments are initially measured at fair value. Such assets are subsequently held at fair value at each balance sheet date. The changes in fair value are recognised in the SOFA. The fair value of listed investments is determined using bid price in accordance with the practice of the appropriate stock exchange. Unlisted investments are valued by reference to latest dealing prices, valuations from reliable sources or net asset values.

k) Subsidiary undertakings

Investment in the Board’s subsidiary companies are held at cost less accumulated impairment losses.

43

Notes to the financial statements of the Church of England Pensions Board for the year ended 31 December 2020

1. Accounting policies (continued)

l) Taxation As a registered charity, the Board is exempt from taxation on its income and gains falling within Part 11 of the Corporation Taxation Act 2010 or section 256 of the Taxation of Chargeable Gains Act 1992 to the extent that they are applied to charitable purposes.

The Board, in common with many other charities, is unable to recover the majority of Value Added Tax (VAT) incurred on expenditure. The amount of VAT that cannot be recovered is included in the underlying cost to which it relates.

m) Related parties

The Church of England comprises a large number of legally independent bodies in its parishes, cathedrals and dioceses as well as at national level. These bodies are not related to the Board as defined in the Charities SORP or chapter 33 of FRS 102: Related parties disclosures. Transactions and balances with these bodies are accounted for in the same way as other transactions and, where material, are separately identified in the notes to the financial statements. The Church of England Pensions Board is related to ChECS, as it is a partner in this joint venture. Details are given in Note 17.

n) Funds

In line with the SORP, the Board segregates its funds between those that are restricted and those that are unrestricted.

Unrestricted funds are funds received by the Board that are available for use at the discretion of the Board in pursuing the general charitable objectives of the charity.

Restricted funds are funds received by the Board for particular purposes and are to be used in accordance with those purposes. An analysis of restricted funds is provided in note 15.

o) Significant judgements and estimates

The Board’s key judgements, which have a significant effect on the amounts recognised in the financial statements, are described in the accounting policies and are summarised below:

The Board’s key estimates, which have a significant effect on the amounts recognised in the financial statements, are described in the accounting policies and are summarised below:

2. Income from grants, donations and legacies

Note
Grants from:
The Archbishops' Council
4
Other grants		 2020
£’000
5,299
32		 2019
£’000
5,046
23
Total grants 5,331 5,069
Donations
Legacies		 56
785		 158
5,652
Total income from grants, donations and legacies 6,172 10,879

The Archbishops’ Council makes grants from money provided by the dioceses under the General Synod Vote 5, towards the costs of the CHARM scheme. All income from grants, donations and legacies was attributable to restricted funds.

3. Investment income

Dividends
Rental income from investment properties
Interest on cash		 2020
£’000
1,365
10
10		 2019
£’000
1,582
10
24
Total income from investments 1,385 1,616

All income from investments of £1,385,000 (2019: £1,616,000) was attributable to restricted funds.

44

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

4. Charitable activities

Rental
properties
Shared
ownership
Mortgage
properties
Supported
housing
Other
charitable
activities
Total
restricted
funds
Notes
£’000
£’000
£’000
£’000
£’000
£’000
Income from charitable
activities:
Rent received
6,999
553
-
1,404
-
8,956
Service charge received
-
88
-
2,390
-
2,478
Income from mortgage
properties
-
-
2,241
-
-
2,241
Support costs recharge
-
-
-
-
-
-		 Unrestricted
funds
Pension
Schemes
2020
Total
£’000
£’000
-
8,956
-
2,478
-
2,241
7,367
7,367		 2019
Total
£’000
8,500
2,825
2,305
6,883
Total income from
charitable activities
6,999
641
2,241
3,794
-
13,675		 7,367
21,042
-
8,376
-
101
-
6,167
7,367
11,227
62
-
2,342
-
172
-
761
-
601		 20,513
Expenditure on
charitable activities:
Financing costs (interest
and commitment fee)
5,744
439
2,193
-
-
8,376
Grant making
-
-
-
-
101
101
Property costs (repairs,
insurance and other
costs)
6,052
11
104
-
-
6,167
Support costs
6
1,737
579
386
1,158
-
3,860
Amortisation of
arrangement fees
62
-
-
-
-
62
Service charge costs
-
76
-
2,266
-
2,342
Nursing care costs
(former residents)
-
-
-
172
-
172
Supported Housing and
other direct costs
-
-
-
761
-
761
Depreciation and
impairment charges
10
-
-
-
601
-
601		 8,403
107
7,599
10,821
62
2,598
283
778
599
Total expenditure on
charitable activities
13,595
1,105
2,683
4,958
101
22,442		 7,367
29,809		 31,250
Unwinding of pension
deficit on charitable
(80)
(26)
(17)
(52)
-
(175)		 -
(175)		 (168)
activities 7,367
29,634
31,082
Total expenditure

including pension deficit
movement in year
13,515
1,079
2,666
4,906
101
22,267

45

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

4. Charitable activities (continued)

For comparative purposes, details of 2019 charitable income and expenditure are set out below:

Notes
Income from charitable
activities:
Rent received
Service charge received
Income from mortgage
properties
Fees received for nursing
care
Support costs recharge		 Rental
properties
Shared
ownership
Mortgage
properties
Supported
housing
Other
charitable
activities
Total
restricted
funds
Unrestricted
funds
Pension
Schemes
2019
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
6,846
551
-
1,103
-
8,500
-
8,500
-
93
-
2,732
-
2,825
-
2,825
-
-
2,305
-
-
2,305
-
2,305
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,883
6,883
Total income from 6,846
644
2,305
3,835
-
13,630
6,883
20,513
charitable activities
Expenditure on charitable
activities:
Financing costs (interest
and commitment fee)
Grant making
Property costs (repairs,
insurance and other costs)
Support costs
6
Amortisation of
arrangement fees
Service charge costs
Nursing care costs
Supported Housing and
other direct costs
Depreciation and
impairment charges
10		 5,723
434
2,246
-
-
8,403
-
8,403
-
-
-
-
107
107
-
107
7,406
31
116
46
-
7,599
-
7,599
1,772
591
394
1,181
-
3,938
6,883
10,821
62
-
-
-
-
62
-
62
-
39
-
2,559
-
2,598
-
2,598
-
-
-
283
-
283
-
283
-
-
-
778
-
778
-
778
-
-
-
599
-
599
-
599
Total expenditure on 14,963
1,095
2,756
5,446
107
24,367
6,883
31,250
charitable activities
Unwinding of pension
deficit on charitable (74)
(26)
(18)
(50)
-
(168)
-
(168)
activities
Total expenditure
including pension deficit
movement in year		 14,889
1,069
2,738
5,396
107
24,199
6,883
31,082

The deficit on charitable activities is funded through a combination of specific and general voluntary income, investment income, and realised gains on disposal of investments and property. In the year ended 31 December 2020 grants of £5,299,000 were received from the Archbishops' Council towards the CHARM scheme (2019: £5,046,000). In addition, the Board's broader charitable activities were funded through voluntary income of £873,000 (2019: £5,833,000), Investment income of £1,385,000 (2019: £1,616,000) and gains on disposal of property of £479,000 (2019: £2,116,000).

Income & Expenditure from charitable activities:

Rental Properties

The Archbishops’ Council, from money provided by the dioceses under the General Synod Vote 5, makes grants towards the costs of the CHARM scheme, being the excess of direct expenditure and interest payable over maintenance contributions receivable from residents.

Rent from tenancies starting after 1 April 2015 are target rents based on the value of the property and are subsidised so that they are more affordable than market rents. Rent from tenancies before this are based on the occupant’s ability to pay. Residents pay for moving costs, furnishings and white goods, contents insurance and on-going utility and council tax costs. The Board pays for repairs and on-going maintenance of the properties.

46

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

4. Charitable activities (continued)

There are a small number of properties that are let on the open market at market rents during short periods when a property is not occupied by residents eligible for the CHARM scheme. At 31 December 2020 there were 19 (2019: 23) such tenancies.

All tenancies fall into the definition of operating leases as set out in FRS 102 section 20 and clarified in the Housing SORP 2014 paragraph 10.3 (which though the Board does not apply, it does look to this guidance for clarification where the Charities SORP and FRS 102 are silent on particular issues). All tenancies are cancellable, either on death or notice of the resident and are not assignable.

Shared Ownership

Residents pay rent based on the Board’s share of the ownership of the property and the cost of buildings insurance.

For some properties bought before 1 April 2014, residents also pay a service charge towards the repairs and maintenance of properties. For properties bought after 1 April 2014, or where residents have opted, the responsibility for repairs and maintenance lies with the resident.

Mortgage Properties

The mortgage scheme offered value linked loans to retired clergy and closed to new business in 2008. Mortgagees pay an interest-only amount on the capital advanced.

A small number of loans pre-dating the 1983 CHARM mortgage scheme remain, where a fixed amount of interest is paid based on the capital advanced. At 31 December 2020, the number of such loans in place was 4 (2019: 5).

Supported Housing

Some residents in the schemes receive subsidies from the Board’s charitable funds. The cost of running the schemes is not met fully by rent and service charge fees. The nursing home closed in March 2017 however the Board continues to subsidise the nursing care of former residents of the nursing home. The operating deficit is met from the Board’s charitable funds.

Other charitable activities

Grants are payable to augment the income of those retired clergy and clergy widow(er)s whose income falls below a certain standard, which is reviewed annually.

5. Raising funds

5.
Raising funds
Investment management costs (direct costs) 2020
£’000
49		 2019
£’000
23
Total cost of raising funds 49 23

6. Support costs

Support costs include department running costs and governance costs, plus charges for using shared services operated by ChECS. They are included in charitable expenditure (note 4) and are apportioned to the various charitable activities to which they relate.

Restricted funds Unrestricted Total
funds
Rental Shared
Mortgage		 Supported Total Pension 2020
properties ownership
properties		 housing schemes
£’000 £’000
£’000		 £’000 £’000 £’000 £’000
Housing department 997 333
222		 666 2,218 - 2,218
Executive and Secretariat 132 44
29		 88 293 336 629
Governance costs 55 18
12		 36 121 175 296
Pensions department - -
-		 - - 3,326 3,326
Investments department - -
-		 - - 2,121 2,121
Shared services 553 184
123		 368 1,228 1,409 2,637
Total support costs 1,737 579
386		 1,158 3,860 7,367 11,227
2019
Total support costs 1,772 591
394		 1,181 3,938 6,883 10,821

47

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

6. Support costs (continued)

For comparative purposes, details of 2019 support costs are set out below:

Restricted funds Unrestricted Total
funds
Rental Shared
Mortgage		 Supported Total Pension 2019
properties ownership
properties		 housing schemes
£’000 £’000
£’000		 £’000 £’000 £’000 £’000
Housing department 1,070 357
238		 713 2,378 - 2,378
Executive and Secretariat 111 37
24		 74 246 264 510
Governance costs 56 19
13		 37 125 175 300
Pensions department - -
-		 - - 3,043 3,043
Investments department - -
-		 - - 1,998 1,998
Shared services 535 178
119		 357 1,189 1,403 2,592
Total support costs 1,772 591
394		 1,181 3,938 6,883 10,821

Housing department costs

These costs are allocated on a ‘per head’ basis: costs of housing staff are allocated 45% to rental properties, 30% to supported housing schemes, 10% to mortgages and 15% to shared ownership.

Executive and Secretariat and shared service costs

Centrally incurred management and shared service costs are allocated between pension schemes and the charity on a ‘per head’ basis. The charity’s housing share is then allocated 45% to rental properties, 30% to supported housing schemes, 10% to mortgages and 15% to shared ownership.

Governance costs

Governance costs comprise staff and non-staff costs relating to the general running of the Board, including supporting the work of the Board and its Committees. Trustees (and co-opted members) of the Board are reimbursed for travel expenses incurred whilst on official business but are not entitled to any other remuneration or allowances. In the year to 31 December 2020, 12 (2019: 13) trustees claimed a total of £3,000 (2019: £14,000). Governance costs other than external audit costs are allocated between pension schemes and the charity on a ‘per head’ basis. The charity’s housing share is then allocated 45% to rental properties, 30% to supported housing schemes and nursing care, 10% to mortgages and 15% to shared ownership.

External audit (including VAT)
Internal audit
Board and committee meetings		 2020
£’000
70
50
1		 2019
£’000
70
49
6
Total governance costs 121 125

Total fees paid (excluding VAT) to Crowe U.K. LLP are shown below:

Audit of CEPB and its subsidiary undertakings 2020
£’000
58		 2019
£’000
58
Total audit fees relating to current year for CEPB and its subsidiaries 58 58
Audit of Pension Schemes 97 96
Total audit fees relating to current year for Pension Schemes 97 96

Pensions department costs

Expenses are incurred by the Board for administering the pension schemes. These costs are recovered from the pension schemes by charging an administration fee to each scheme.

Investment department costs

Expenses are incurred by the Board for managing the investment portfolio of the Church of England Investment Fund for Pensions through which the pension schemes hold investments. These costs are recovered by the Board as part of the administration fee the Board charges each pension scheme.

Shared service costs

Shared services are provided by Church of England Central Services. Expenses incurred by the Board for administering the Pension Funds are either charged directly to the activity to which they relate or are allocated to the funds in proportion to staff costs, number of data processes or other relevant criteria.

48

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

7. Staff numbers and costs

The Chief Executive and staff employed to work in the supported housing schemes are employed directly by the Board. The Board is joint employer, together with the other National Church Institutions (the NCIs), of most of the staff of the NCIs. In addition to staff employed directly, the work of the Board is supported by staff in shared service departments who provide finance, HR, communications, legal, IT and internal audit services. Since 1 April 2014 they have been employed by a separate NCI, Church of England Central Services (ChECS). Prior to this they had one of the three main NCIs as managing employer and their costs were shown only in the relevant NCI’s financial statements.

The SORP requires that the costs of staff employed by third parties who operate on the organisation’s behalf be disclosed in the financial statements. In order to comply with the spirit of the SORP, the costs of all ChECS staff are shown in aggregate in the tables below – the Board’s share of which was £1,644,000 (2019: £1,622,000).

The cost of staff for which the Board is the managing employer and for ChECS (in aggregate) was:

Average number
employed
Salaries
National Insurance
costs
Pension contributions
Total cost of staff
Total chargeable to
Charitable Funds		 Pensions Board own staff
ChECS
Housing
Pensions and
Investments
Secretariat
Supported
housing
Total
Shared services
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
36
32
41
38
4
3
93
98
174
171
178
165
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
1,390
1,315
1,997
1,831
352
264
1,389
1,383
5,128
4,793
8,189
7,463
151
143
228
207
44
32
97
94
520
476
911
820
196
184
271
255
49
38
173
181
689
658
1,898
1,796
1,737
1,642
2,496
2,293
445
334
1,659
1,658
6,337
5,927
10,998
10,079
1,737
1,642
-
-
207
154
1,659
1,658
3,603
3,454		 ChECS

Included in staff costs is £nil (2019: £27,000) paid by way of redundancy costs to nil (2019: 3) individuals following a restructuring. Restructuring costs are accounted for in full in the year in which the restructure is announced.

The number of staff whose total employee benefits for the year fell in the following bands were:

£60,001 to £70,000
£70,001 to £80,000
£80,001 to £90,000
£90,001 to 100,000
£100,001 to 110,000
£110,001 to 120,000
£120,001 to £130,000
£130,001 to £140,000
£140,001 to £150,000
£150,001 to £160,000		 Pensions Board own staff
Housing
Pensions and
Investments
Secretariat
Supported
housing schemes
2020
2019
2020
2019
2020
2019
2020
2019
1
-
3
3
1
1
-
-
1
1
2
1
-
-
-
-
1
-
1
1
1
-
-
-
-
-
3
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
1
-
-
-
-
-
-
-
-
-
-		 ChECS
Shared services
2020
2019
14
13
7
5
2
5
3
4
5
1
-
-
1
1
-
-
-
-
-
1

Employee benefits include gross salaries and termination payments but do not include employer pension contributions and employer National Insurance contributions.

Most staff above were members of the Church Administrators Pension Fund. Of those directly managed by the Board, 12 (2019: 8) staff accrued benefits under a defined contributions scheme for which contributions for the year were £125,000 (2019: 90,000). The other 4 (2019: 4) staff accrued benefits under a defined benefit scheme. Of those managed by ChECS, 28 (2019:24) staff accrue benefits under a defined contribution scheme for which contributions for the year were £295,000 (2019: £256,000). The remaining 4 (2019: 6) staff members accrue benefits under a defined benefit scheme.

The highest paid member of staff earned £147,000 (2019: £143,000). Further details of the Board’s remuneration policy are included in the Management section of the Board’s report, on page 29. The Board’s executive leadership team comprises 10 individuals (2019: 10), 7 (2019: 7) of whom are employed directly by the Board and 3 (2019: 3) by ChECS. The aggregate remuneration for these 10 individuals, including National Insurance and pension contributions, was £1,179,000 (2019: £1,119,000).

Interest free loans are made for travel season tickets and interest free green travel loans for the purchase of bicycles and electric scooters.

49

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

8. Staff pensions

Staff employed jointly by the National Church Institutions

Pension benefits from Service up to 31 December 1999

These are met by the Church Commissioners for England, so no costs or liability are reflected by the Board.

Pension benefits from Service from 1 January 2000

Benefits for staff arising from service from 1 January 2000 are provided by the Church Administrators Pension Fund (“CAPF”).

The participating employers are responsible for making contributions of £390,000 (2019: £390,000) towards the administration costs of the CAPF. The Board’s share of these costs was £41,000 (2019: £49,000).

Staff who were in service as at 30 June 2006 are members of the defined benefit section of the CAPF. This is considered to be a multi-employer scheme as described in FRS 102 paragraph 28.11 and consequently is accounted for as if it were a defined contribution scheme, where employer contributions payable in the year are charged to expenditure.

The contributions to the CAPF are assessed by an independent qualified actuary using the projected unit method of valuation. A valuation of the scheme is carried out once every three years, the most recent having been carried out as at 31 December 2019. This revealed a deficit of £9.1m. Deficit contributions of £2,400,000 per annum from January 2021 are payable until 30 April 2023. At 31 December 2020, payments were made under the previous Schedule of Contributions, where the deficit recovery contributions of £2,667,723 per annum from 1 January 2018 were subject to an annual increase on 1 January each year of 3.3% per annum.

The Board’s share of this agreed deficit recovery plan is provided for. The provision is measured at its net present value. The table below shows the movement on the provision:

CEPB staff Share of ChECS staff 2020 CEPB staff Share of ChECS staff 2019
Provision at 1 January 477 298 775 527 337 864
Contributions Paid (114) (61) (175) (118) (63) (181)
Interest charged on
provision		 4 2 6 9 4 13
Adjustment to net present
value of provision		 12 6 18 59 20 79
Provision at 31 December 379 245 624 477 298 775

Staff who joined after 20 June 2006 are members of the defined contributions section of the CAPF. Employer contributions payable in the year are charged to expenditure.

Staff employed directly by the Board (mainly in supported housing schemes)

Pension benefits for staff in supported housing managerial positions are provided for by a defined benefit section of the Church Workers Pension Fund (“CWPF”). The scheme is considered to be a multi-employer scheme as described in FRS 102 paragraph 28.11 and consequently is accounted for as if it were a defined contribution scheme, where employer contributions payable in the year are charged to expenditure.

The contributions to the Fund are assessed by an independent qualified actuary using the projected unit method of valuation. The last full valuation of the Fund, as at 31 December 2019, showed there is no more deficit (2016: £29.4m). There is no deficit recovery needed from each participating employer in the scheme from 2021. In 2020, the Board’s share of the deficit contributions of £56,000 were paid and £4,300 administration fees were charged to expenditure.

Pension benefits for other staff are provided for by a defined contribution scheme in CWPF, where employer contributions payable in the year are charged to expenditure.

50

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

9. Investment assets

GROUP At 1 January 2020 Additions Disposals Gains/(losses) Cash movements At 31 December 2020
£'000 £'000 £'000 £'000 £'000 £'000
UK investment funds 41,170 830 (702) (518) - 40,780
Cash held by investment mangers 412 - - - (190) 222
Total UK investment funds 41,582 830 (702) (518) (190) 41,002
UK investment properties 688 - - 50 - 738
Consolidated total investment assets 42,270 830 (702) (468) (190) 41,740
At 1 January 2019 Additions Disposals Gains/(losses) Cash movements At 31 December 2020
CHARITY
£'000 £'000 £'000 £'000 £'000 £'000
UK investment funds 41,170 830 (702) (518) - 40,780
Cash held by investment mangers 412 - - - (190) 222
Total UK investment funds 41,582 830 (702) (518) (190) 41,002
UK investment properties 688 - - 50 - 738
Investment in subsidiary 13 - - - - 13
Charity's total investment assets 42,283 830 (702) (468) (190) 41,753

Funds were managed by Savills, Mayfair and Brewin Dolphin. Investment funds were held as follows:

2020 2019
£'000 £'000
Savills 19,997 20,526
Mayfair 8,136 8,647
Brewin Dolphin 12,869 12,409
Total 41,002 41,582

Subsidiaries

The Board owns 100% of CEPB Developments Ltd, a dormant company limited by shares, held to undertake property and building development at the supported housing schemes and nursing home, and CEPB Mortgages Ltd, a company limited by guarantee, held to administer mortgages on behalf of the Board. Both companies are registered at 29 Great Smith Street, London, SW1P 3PS.

The Board also owns 100% of CHARM Finance PLC, a company limited by share capital of £50,000 (of which £12,500 has been paid up by the Board), held as a special purpose vehicle which in August 2015 provided £70m of funds to the Board via the issue of £100m of 3.126% Secured Bonds (including £30m in principal amount of Retained Bonds) due August 2048. In April 2018 CHARM Finance PLC provided a further £30m of funds to the Board via the issue of £50m of 3.509% Secured Bonds (including £20m in principal amount of Retained Bonds) also due in 2048. These funds are being used to secure current and future obligations for clergy housing in retirement.

The financial results of the Subsidiaries are detailed in Note 16.

Joint ventures

ChECS is a charitable joint venture between the Church Commissioners, the Archbishops’ Council and the Church of England Pensions Board, who are equal partners. The purpose of ChECS is to enhance the efficiency and effectiveness of the charitable national and diocesan institutions of the Church of England and of other charities with a church ethos, by facilitating the provision of cost-effective shared financial, legal and other services.

The charity was registered with the Charity Commission on 31 December 2013 and started operating from 1 April 2014. Prior to this, the responsibility for the provision of shared services was split between the three main NCIs. The previous management arrangements continued into the new structure.

The Board’s share of net assets and net income of ChECS was £nil (2019: £nil). As at 31 December 2020, £323,000 was owed by ChECS to the Board (2019: £146,000 owed by the Board to ChECS) representing amounts loaned to ChECS by the Board. In addition, £64,000 was owed by the Board to ChECS for services rendered in December 2020 , which has been included within trade creditors and accrued expenditure.

The Pensions Board have no associated undertakings.

UK investment properties

The valuers of the investment properties were Savills LLP.

51

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

10. Tangible assets – Supported housing and IT systems

Consolidated and charity At 1 January 2020 Additions Disposals Charge in Impairment At 31 December 2020
year
£’000 £’000 £’000 £’000 £’000 £’000
Supported Housing land and buildings
Cost 27,292 - - - - 27,292
Depreciation (4,759) - - (506) - (5,265)
Net book value 22,533 - - (506) - 22,027
Fixtures and fittings
Cost 4,384 62 - - - 4,446
Depreciation (3,158) - - (95) - (3,253)
Net book value 1,226 62 - (95) - 1,193
IT systems (under construction)
Cost 294 1,064 - - - 1,358
Net book value 294 1,064 - - - 1,358
Total supported housing and IT systems 24,053 1,126 - (601) - 24,578

IT systems represents the capitalised costs incurred in respect of the construction of the new Housing Management System and a major upgrade to the Pensions Administration System. No depreciation charge is incurred whilst the assets are under construction.

11. Tangible assets – CHARM properties

The Board owns a number of different types of properties which it uses to fulfil its charitable objective: to provide retirement housing for retired clergy (CHARM).

Consolidated Book Additions Disposals Transfers Book No. of Additions Disposals Transfers No. of
value at value at properties properties at
1 31 at 1 31
January December January December
2020 2020 2020 2020
£’000 £’000 £’000 £’000 £’000
Rental properties
Funded by CC 25,371 - (1,496) - 23,875 268 - (16) - 252
Funded by PB 167,781 5,188 (1,148) - 171,821 924 18 (7) - 935
Rental properties total 193,152 5,188 (2,644) - 195,696 1,192 18 (23) - 1,187
Shared ownership
properties
Funded by CC 3,551 - (75) - 3,476 37 - (1) - 36
Funded by PB 6,357 94 (101) - 6,350 68 1 (1) - 68
Shared ownership
properties total		 9,908 94 (176) - 9,826 105 1 (2) - 104
Mortgaged properties
Funded by CC 31,089 - (1,955) (18) 29,116 563 - (39) (2) 522
Funded by PB 823 - - 18 841 13 - - 2 15
Mortgaged properties total 31,912 - (1,973) - 29,957 576 - (39) - 537
Totals
Properties with significant
restrictions (funded by 60,011 - (3,526) (18) 56,467 868 - (56) (2) 810
Church Commissioners)
Properties without
significant restrictions
(funded by the Pensions		 174,961 5,282 (1,249) 18 179,012 1,005 19 (8) 2 1,018
Board)
Total 234,972 5,282 (4,775) - 235,479 1,873 19 (64) - 1,828

52

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

11. Tangible assets – CHARM properties (continued)

Charity only Book Additions Disposals Transfers Book No. of Additions Disposals Transfers No. of
value at value at properties properties
1 31 at 1 at 31
January December January December
2020 2020 2020 2020
£’000 £’000 £’000 £’000 £’000
Rental properties
Funded by CC 25,371 - (1,496) - 23,875 268 - (16) - 252
Funded by PB 167,781 5,188 (1,148) - 171,821 924 18 (7) - 935
Rental properties total 193,152 5,188 (2,644) - 195,696 1,192 18 (23) - 1,187
Shared ownership
properties
Funded by CC 3,551 - (75) - 3,476 37 - (1) - 36
Funded by PB 6,357 94 (101) - 6,350 68 1 (1) - 68
Shared ownership
properties total		 9,908 94 (176) - 9,826 105 1 (2) - 104
Mortgaged properties
Funded by CC 25,763 - (1,830) (18) 23,915 507 - (38) (2) 467
Funded by PB 418 - - 18 436 9 - - 2 11
Mortgaged properties
total		 26,181 - (1,830) - 24,351 516 - (38) - 478
Totals
Properties with
significant restrictions
(funded by Church		 54,685 - (3,401) (18) 51,266 812 - (55) (2) 755
Commissioners)
Properties without
significant restrictions
(funded by the Pensions		 174,556 5,282 (1,249) 18 178,607 1,001 19 (8) 2 1,014
Board)
Total 229,241 5,282 (4,650) - 229,873 1,813 19 (63) - 1,769

The fixed assets shown in the Charity-only table above include only those mortgage loans made directly by the Board, for which CC-funding was received. Loans made by the Board to CEPB Mortgages Ltd, but ultimately funded by CC, are reflected in current debtors. See note 12. The related mortgages issued by CEPB Mortgages Ltd are shown in the Consolidated fixed assets table.

Financing and restriction

Historically, the Board’s own properties were funded from trusts and legacies. From 1983 until July 2010 most of the rental, shared ownership and mortgaged properties purchased were financed by loans from the Church Commissioners. Under this arrangement, the legal ownership of each property lay with the Board but a significant part of the economic interest lay with the Commissioners. In the case of mortgaged and shared ownership properties, the Commissioners’ economic interest was in the same proportion as the amount of financing they provided compared to the purchase price. Purchases were recognised at cost and the loan from the Commissioners recognised at an equal amount within creditors. If the property were sold, an amount equal to the proceeds (for mortgaged and shared ownership properties, in the same proportion as the financing they provided compared to the purchase price) would be repayable. This arrangement meant that the Commissioners retained a significant degree of financial control over the properties they funded, and on a property becoming vacant, determined if and when it was sold and for how much.

Since the end of the Commissioners’ funding arrangement, financing for purchases of new rental or shared ownership properties has been provided through three sources. Firstly in 2010 the Board put in place a loan facility with Santander. Secondly in 2015 the Board was loaned £70,000,000 from its subsidiary CHARM Finance PLC, which raised funds through the issue of a listed bond. Thirdly in 2018 the Board was loaned £30,000,000 from its subsidiary CHARM Finance PLC, which raised funds through the issue of a second listed bond. Further details of both facilities are provided in Note 13.

Of the £70,000,000 loaned to the Board in 2015, £41,841,000 was used to purchase the economic interest in 196 properties which had originally been funded by the Commissioners. The Commissioners have retained a right to receive any profit on disposal of any of the 196 properties up to August 2025, over the agreed purchase price of that property, and in 2020 two (2019: three ) properties were sold by the Board, with £20,000 (2019: £69,000) paid to the Church Commissioners as a result of this agreement. In the opinion of the trustees however, as the remainder of these properties have been identified for longterm use by the Charity, it is not expected that many further payments will accrue to the Church Commissioners as a result of this arrangement.

In addition to these arrangements, 48 rental properties were purchased with contributions from dioceses and others, where the contributions are repayable when the property is sold, as either a simple repayment or in the same proportion as the original contribution to the purchase price, depending on the agreement made. The Board recognises the full cost of the property and also recognises a liability for the amount contributed (see note 13).

53

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

12. Debtors

12. Debtors
Consolidated Charity
2020 2019 2020 2019
£'000 £'000 £'000 £'000
Trade debtors 512 478 509 478
Subsidiary undertakings - - *5,608 *5,730
Prepayments and accrued income 835 5,794 835 5,793
Joint venture (ChECS) 323 146 325 146
Other debtors 145 318 145 318
Total 1,815 6,736 7,422 12,465

* Loans from the Church of England Pensions Board to CEPB Mortgages Ltd are repayable when the properties associated with them are sold. This is categorised as a current debtor for the Charity in line with FRS 102 section 4.7. See Note 13 for more details.

13. Creditors

Current liabilities: Consolidated Charity
2020 2019 2020 2019
£'000 £'000 £'000 £'000
Amounts falling due within one year
Trade creditors 2,610 1,821 2,610 1,820
Accruals and deferred income 2,596 2,290 2,596 2,290
Tax creditor 4 26 4 26
Other creditors 1,175 1,215 1,175 1,219
Total amounts falling due within one year: 6,385 5,352 6,385 5,355
Concessionary loans repayable on sale of fixed assets
Loans from Church Commissioners for:
-
rental properties		 23,873 25,371 23,874 25,371
-
shared ownership properties		 3,476 3,551 3,476 3,551
-
mortgage properties		 29,117 31,089 29,117 31,089
Diocesan and other creditors 759 758 758 758
Total loans repayable on sale of fixed assets 57,225 60,769 57,225 60,769
Total current liabilities 63,610 66,121 63,610 66,124

Loans from the Church Commissioners are repayable when the properties associated with them are sold. The trigger for the repayment is the sale of the property and the proceeds are passed in full to the Church Commissioners. Properties are sold when residents vacate rented properties, shared ownership properties are sold and mortgages are redeemed. These assets are classified as fixed assets and are included in note 11.

FRS 102 section 4.7 states that where the repayment of a creditor cannot unconditionally be deferred for more than a year, it must be classed as a current liability. Even though experience has shown that loans from the Church Commissioners will be repaid steadily over a timeline substantially longer than one year, they meet this definition and as a result are included within current liabilities.

The terms of these concessionary loans are: for loans granted prior until 31 March 1993 the initial interest rate was 3%, increasing in line with RPI each April; for loans granted from 1 April 1993 the initial interest rate was 4%, increasing in line with RPI each April.

The same current liability classification has been applied to the Diocesan loans to the Pensions Board.

54

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

13. Creditors (continued)

13. Creditors (continued)
Non-current liabilities: Consolidated Charity
2020 2019 2020 2019
£'000 £'000 £'000 £'000
Bond liabilities – 2015 Bond 70,000 70,000 - -
Bond liabilities – 2018 Bond 30,000 30,000 - -
Bond liabilities – capitalised bond set-up costs (689) (718) - -
Intra-group liability – loan repayable to CHARM Finance PLC - - 100,000 100,000
Intra-group liability – capitalised bond set-up costs - - (689) (718)
Loan from Santander 18,000 17,500 18,000 17,500
Loan from Santander - capitalised set-up costs (150) (183) (150) (183)
Total 117,161 116,599 117,161 116,599

The two bonds, issued by subsidiary undertaking CHARM Finance plc, were issued to finance the growth and development of the CHARM scheme. Transaction costs of £509,000 were incurred in respect of the 2015 bond, and £306,000 in respect of the 2018 bond. At 31 December 2019, the amortised cost of the set-up fees incurred (predominantly legal and financial advice fees) for both bonds was £689,000 (2019: £718,000).

For the 2015 bond, interest due up to August 2017 was based on the initial interest rate of 3.126% adjusted for changes in CPI (subject to a 4% cap and a floor of zero). Since August 2017 the applicable interest rate has risen to 3.154%. Repayment of the bond is due in five equal instalments of £14m due in August of 2038, 2041, 2043, 2045 and 2048 respectively. The bond is secured by a fixed charge over 437 properties held by the Charity.

For the 2018 bond, interest due is based on the fixed interest rate of 3.509%. Repayment of the bond is due in three instalments on 12 November 2044, 12 November 2046 and 12 April 2048. The bond is secured by a fixed charge over 209 properties held by the Charity.

The following table details the maturity of the bond-related contractual payments as at 31 December 2020:

2015 Bond 2018 Bond
Period Interest due Capital repayment Interest due Capital repayment
£’000 £’000 £’000 £’000
Due to end December 2020 809 - 140 -
Due within one year (to end December 2021) 2,356 - 1,053 -
Due within five years (to end December 2025) 9,481 - 4,214 -
Due after five years 41,881 70,000 21,786 30,000
Total 54,527 70,000 27,193 30,000

The intra-group liability due by the charity to CHARM Finance plc mirrors the terms of the bonds noted above.

The charity has a loan facility with Santander through Abbey National Treasury Services PLC which at December 2020 was secured by fixed charges over 257 properties (2019: 118 properties) owned by the charity, with occupied market value of £61,000,000 (2019: £29,000,000). The loan is repayable, subject to terms and conditions, at June 2025.

The cost of the Santander arrangement fee of £500,000 (1% of the loan facility) is offset against the loans and is being amortised over 15 years. At 31 December 2020, the amortised cost was £150,000 (2019: £183,000).

55

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

14. Financial Instruments

Consolidated Consolidated Charity
Note 2020 2019 2020 2019
£'000 £'000 £'000 £'000
Financial assets at fair value through statement of financial
activities
Listed non-current investments 9 41,739 42,270 41,752 42,283
Total financial assets 41,739 42,270 41,752 42,283
15. Funds
Consolidated and charity Balance at
Income		 Expenditure Investment Other Transfers Balance at
1 January gains gains 31 December
2020 2020
£'000
£'000		 £'000 £'000 £'000 £'000 £'000
Unrestricted funds -
7,367		 (7,367) - - - -
Total unrestricted funds -
7,367		 - (7,367) - - - -
Restricted funds:-
General Purposes Fund:
-
General Funds		 109,890
21,166		 (18,411)
-
(556)		 - (2,650) 109,489
-
Earmarked – Property
Maintenance		 7,838
-		 (3,921) - - 2,650 6,567
Clergy Retirement Housing Trust &
other trusts		 11,972
545		 (203) 88 - - 12,402
Total restricted funds (excl.
pension reserve)		 129,700
21,711		 (22,485) (468) - - 128,458
Pension reserve (775)
-		 169 - (18) - (624)
Total funds 128,925
29,078		 (29,683) (468) (18) - 127,834
For comparative purposes, the table below shows the movement on funds for the year ending 31 December For comparative purposes, the table below shows the movement on funds for the year ending 31 December For comparative purposes, the table below shows the movement on funds for the year ending 31 December For comparative purposes, the table below shows the movement on funds for the year ending 31 December For comparative purposes, the table below shows the movement on funds for the year ending 31 December 2019:
Consolidated and charity Balance at Income Expenditure Investment Other Transfers Balance at
1 January gains gains 31 December
2019 2019
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Unrestricted funds - 6,883 (6,883) - - - -
Total unrestricted funds - 6,883 (6,883) - - - -
Restricted funds:-
General Purposes Fund:
-
General Funds		 108,597 27,666 (19,815) 942 - (7,500) 109,890
-
Earmarked – Property
Maintenance		 4,429 - (4,091) - - 7,500 7,838
Clergy Retirement Housing Trust &
other trusts		 11,507 575 (484) 374 - - 11,972
Total restricted funds (excl.
pension reserve)		 124,533 28,241 (24,390) 1,316 - - 129,700
Pension reserve (864) - 168 - (79) - (775)
Total funds 123,669 35,124 (31,105) 1,316 (79) - 128,925

56

Notes to the financial statements of the Church of England Pensions Board For the year ended 31 December 2020

15. Funds (continued)

Unrestricted funds

The unrestricted funds represent expenditure incurred by the CEPB on salaries and working expenses subsequently recovered from the pension funds administered by the Board. The CEPB has no net assets or liabilities in its own right as a body corporate.

Restricted funds

The General Purposes Fund (“GPF”) is the largest charitable fund administered by the Church of England Pensions Board, covering the provision, maintenance & management of homes of residence for retired clergy and church workers and their spouses/former spouses/dependants, etc.

Within restricted funds, the Trustees have earmarked an amount for property maintenance. £2.6m (2019: £7.5m) was transferred from the restricted general fund to the earmarked Property Maintenance fund to allow for additional property maintenance work.

The Clergy Retirement Housing Trust (“CRHT”) is a registered charity (Charity No. 236627-2) and is a linked charity of the Board. As a linked charity, it is accounted for as a restricted fund. The charitable object of the CRHT is to use its property as residences for those persons who are qualified for such residence by virtue of the provisions of the Clergy Pensions Measure 1961 or any succeeding legislation.

Below is a summary of the assets and liabilities of each fund as at 31 December 2020:

FUND Fixed Assets Current Current Non-Current SUB TOTAL Provision for NET ASSETS
Assets Liabilities Liabilities Pension
Liability
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Unrestricted funds 525 1,241 (1,766) - - - -
Restricted Funds:
General Purposes
Fund		 290,501 4,820 (62,107) (117,161) 116,053 ( 624) 115,429
Clergy Retirement
Housing Trust & 10,770 1,372 263 - 12,405 - 12,405
other trusts
Total 301,796 7,433 (63,610) (117,161) 128,458 (624) 127,834

For comparative purposes, the table below provides a summary of the assets and liabilities of each fund as at 31 December 2019:

FUND Fixed Assets Current Current Non-Current SUB TOTAL Provision for NET ASSETS
Assets Liabilities Liabilities Pension
Liability
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Unrestricted funds 94 955 (1,049) - - - -
Restricted Funds:
General Purposes
Fund		 290,508 8,952 (65,133) (116,599) 117,728 (775) 116,953
Clergy Retirement
Housing Trust & 10,693 1,218 61 - 11,972 - 11,972
other trusts
Total 301,295 11,125 (66,121) (116,599) 129,700 (775) 128,925

16. Subsidiary results

The Board owns 100% of CEPB Developments Ltd, a dormant company limited by shares, held to undertake property and building development at the supported housing schemes, and CEPB Mortgages Ltd, a company limited by guarantee, held to administer mortgages on behalf of the Board. Both companies are registered at 29 Great Smith Street, London, SW1P 3PS.

The Board also owns 100% of CHARM Finance PLC (incorporated and acquired 17 July 2015), a company limited by share capital of £50,000 (of which £12,500 has been paid up by the Board), held as a special purpose vehicle which in August 2015 provided £70m of funds to the Board via the issue of £100m of 3.126% Secured Bonds (including £30m in principal amount of Retained Bonds) due August 2048. In April 2018 CHARM Finance PLC provided a further £30m of funds to the Board via the issue of £50m of 3.509% Secured Bonds (including £20m in principal amount of Retained Bonds) also due in 2048. These funds are being used to secure current and future obligations for clergy housing in retirement.

Summaries of the Board’s significant subsidiaries’ results are shown below:

57

16. Subsidiary results (continued)

CEPB Mortgages

CHARM Finance PLC

2020 2019 2020 2019
£'000 £'000 £'000 £'000
Revenue 343 335 3,442 3,371
Expenditure (343) (335) (3,442) (3,371)
Result - - - -
Total Assets 5,609 5,731 100,285 100,246
Total Liabilities (5,608) (5,730) (100,272) (100,233)
Net Assets 1 1 13 13

17. Related Parties

Subsidiary companies

The Board received £343,000 from CEPB Mortgages (2019: £335,000) in respect of mortgage interest received by the Company. At the balance sheet date, CEPB Mortgages owed the Board £5,609,000 (2019: £5,731,000) in respect of mortgage loans repayable.

The Board paid £3,381,000 to CHARM Finance PLC in 2020 in respect of bond interest paid by the Company (2019: £3,326,000). At the balance sheet date, the Board owed CHARM Finance PLC £99,311,000 (2019: £99,282,000) in respect of loans repayable in relation to the 2015 and 2018 bonds.

Joint ventures

Church of England Central Services (ChECS) is a joint venture between the Church Commissioners, the Archbishops’ Council and the Church of England Pensions Board, and therefore a related party of the Board. More information can be found in Note 9.

Pension Schemes

Details of amounts paid to the pension schemes are disclosed in note 8.