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The Baptist Pension Scheme is expecting to have its defined benefit section bought out next month, having completed two buy-ins. The scheme will continue to run its £80m defined contribution section until at least 2026 but has started discussions about its long-term future.
The buyout with Just Group is due in November, having been pushed back from June this year, with employers and employees receiving communications about it, said pensions manager Steve Kaney.
Just has transacted two buy-ins with the scheme totalling about £350m - the most recent in 2022. The scheme is currently still in the process of liquidating some property holdings.
“We’re just dotting the Is and crossing the Ts,” said Kaney.
After the buyout, there will be a surplus in the “single millions”, he said. Of this, the scheme aims to use half to enhance DB members’ benefits; the other half will stay in the scheme and be allocated to the DC section. The fund aims to complete the wind-up of the DB section in the first half of next year.
“That leaves the question over the DC section,” Kaney said.
The DC section is an authorised master trust. Although the scheme is only open to Baptist churches, colleges and charities, it had to be authorised as a master trust because its employers – of which there are more than 1,000, mostly with less than 10 staff – are non-associated.
“We are not about to cut and run post buyout, it will be business as usual for the DC master trust, but behind the scenes we have kicked off a discussion and focus for our future DC strategy," Kaney, who had led the initial master trust authorisation process, revealed.
The decision will ultimately lie with the main employer, the Baptist Union of Great Britain, which is itself led by a trustee board. Mallowstreet understands that Kaney, along with the chair of the pension fund trustees and two other experts, will make a recommendation to the BUGB board about the DC scheme.
One of the concerns about closing and moving to a larger master trust, said Kaney, is the investment strategy for the default option.
“We are hugely focussed on ethical investments,” he said, questioning whether this would be replicated in a commercial arrangement, even in a bespoke solution.
“Although we are not peanuts, we are not a big weighty scheme either. What influence would we really have over a commercial master trust to make a bespoke solution?” he said. “They all tell us they will. What does bespoke really mean?”
The scheme is not the only one with an accidental DC master trust that is having to consider its future as the DB section is being bought out. The ITB Open Fund, for the UK’s industry training boards, is looking to outsource its DC section ahead of a fund wind-up, having recently completed its last DB buy-in.
How many DC master trusts will there be at the end of the decade?
