Baptist scheme offers members 'ethical lifestyling'

The faith organisation's move is part of a broader shift in DC investment to tailor investment strategies to members' needs, while making sure their choice of a lifestyle fund does not limit the kind of investments they can make.

Robert Ashurst, chairman of the trustee board, said: "The trustees were concerned members who wished to adopt an ethical investment stance should not by doing so be forced to take full responsibility for the long-term management of their own investment strategy, as might happen in many schemes."

One option on offer to the DC scheme's 1,250 active members mimics its default lifestyle strategy but with the equity fund replaced by an ethical equity fund.

The other design is based on the organisation’s closed defined benefit scheme’s approach to ethical investment. This is allied to an asset allocation that reduces risk as a member approaches retirement.

These ethical investment-based lifestyle options have so far been more popular than the self-select funds also available to members since their launch at the start at the year.

Ashurst added: "This reflects the nature of the membership, where there are many more people who have a general view that they wish to invest ethically than there are people who would regard themselves as able to direct their own investment strategy in detail."

Brian Henderson, a partner in consultancy Mercer’s investment business, said: "It is a good example of trustees listening to the members and how it meets their needs."

He added that the organisation’s approach was a good example of how employers are tailoring lifestyle strategies to members that share common beliefs.

The Baptist scheme has faced a series of challenges when explaining these funds to members, holding roadshows to communicate key messages, including:

• Ethical investment can involve additional costs, which can affect long-term outcomes;
• There can be additional risk in an ethically constrained portfolio; and
• There are difficulties using ethical investment in the default option.

Ashurst added: "It is still early days for the new DC arrangements and the pension trustees will be looking to develop their communication strategy further over the coming months and years."