The church in the crunch

Following huge losses during the financial crisis, the Church of England should return to the Christ

No-one is immune from the global economic crunch. That includes the Church of England, which has £5 billion tied up in assets, pensions and buildings. When the archbishops of Canterbury and York started to sermonise on short-term greed and the failures of market, they were embarrassed to discover that the Church had been playing the system in pretty much the same way as everyone else.

Initially, things looked good. Due to its share holdings, England’s Established Church gained hugely from rising oil, gold and copper prices, driven at least in part by speculators. In 2006-7 the Church Commissioners, accountable to parliament, set up a currency-hedging programme, in effect short-selling sterling to guard against rises in other currencies. The C of E invested £13 million in Man Group, the largest listed hedge fund manager. It also has a stock lending programme through JP Morgan Chase and has traded debts, in spite of the Archbishop of Canterbury's criticism of doing so exclusively for profit. The Church sold a £135 million mortgage portfolio last year.

Then things went pear-shaped. A week ago the Man Group was down 30 per cent in early trading after its profits slumped, potentially wiping £4 million off the value of the Church's holdings. The Commissioners have announced an average return on investments of almost 10 per cent a year over the last ten years. But most of these are in property and equities, which have taken a hammering as markets have fallen; so future prospects are not rosy. Exposure in banking (HSBC, TSB, RBS, and HSBOS, which has fallen a staggering 90 per cent) and mining (in defiance of ethical advice) is also costing the C of E dear.

It doesn’t have to be this way. The founder of Christianity once pointed out that “where your treasure is, there is your heart also”. Now is the right time for the Church of England to completely re-examine its asset and investment policies and to put its money where its message is. Given the performance of more ethical funds, that would also be a prudent move.

Many church groups are involved in alternative economic practices – co-ops, credit unions, ethical investment, fairer trade, local exchange schemes, micro credit, small loans for development, initiatives for monetary reform and more. Christianity, Judaism and Islam all have a history of critiquing usury, unjust profit from interest, and Jews and Muslims have set up non-interest based lending institutions.

Globally, churches have an opportunity to use their assets in new and creative ways, for economic change driven by human need rather than by greed. What is needed is the will. The earliest Christian communities were founded on principles of seeking to use material wealth for the common good, striving for equality and giving priority to the poorest. Today’s churches struggle to be so Christian, it seems. But as neo-liberal ideology quakes before stark reality, the wages of economic spin are proving deadly rather than ‘realistic’.

Simon Barrow is co-director of the religion and society think tank Ekklesia. He is author of ‘An economy worth believing in’.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/