EXCLUSIVE: BNP Paribas planning ETV exercise for pension schemes in 2019

BNP Paribas is planning on undertaking an enhanced transfer value (ETV) exercise for its defined benefit pension schemes, it has revealed.

Speaking to Pensions Age, BNP Paribas group pensions manager Lee Sullivan said that the scheme has a longer-term objective of a complete buyout for its DB schemes but there are no timescales.

“The exercises that we are going to be doing in 2019 will be ETV exercises, and then we will be looking at pensioner buy-in; we are also considering buyout for our most well-funded DB scheme, but there are accounting obstacles to get around with regards to that as well,” he stated.

He added that it’s “not necessarily a straightforward decision”, but BNP Paribas is “very much planning to be taking those two big de-risking steps in 2019”. Explaining his approach to risk reduction, Sullivan said that he focuses in on the biggest risks first, and then once those have been mitigated, other risks start to zoom into focus.

“Now what we look at as our biggest risks is longevity for the schemes, and there is a bit of volatility on the accounting basis as well, to do with the fact we’ve hedged out our interest rate and inflation on a gilts basis, rather than on an accounting basis, so there’s a little bit of a mismatch there. Therefore, shrinking the size of the schemes is a good move for us, and that is our next step. Longevity is the other challenge and insurance is an obvious and effective step for us in managing the longevity risk,” he said.

BNP Paribas has five final salary schemes, two of which are still open for accrual and three are completely closed. It also has a single defined contribution (DC) scheme, which were originally 12 separate DC schemes. The DB schemes vary in size from £40m up to £1.3bn, and our DC scheme is just around £1.1bn.

As well as de-risking, Sullivan is also focused on environmental, social and governance issues, as he believes it is of particular importance for the millennial generation.

“BNP Paribas is also enormously vocal on ESG issues. However, we’ve not had any instructions from the bank, this is driven purely by our investment committee but it does reflect how deeply environmental and social issues are embedded at the bank. However, my view is that most of our employees would see their pension scheme as this kind of abstract number that’s not doing anything, but it can influence things and change things.”

Sullivan is hopeful that by introducing ESG into its DC default fund through some “punchy active, asset managers who are really active in the environmental space”, he can use ESG to drive engagement.

“We can talk to people about what their money is really doing. That in itself becomes a virtuous circle; people start engaging more, and appreciate it and might want to contribute more themselves or feel proud of their pension.”

BNP Paribas is also focusing on pre-retirement, and is holding face-to-face seminars for the population who are approaching retirement, having already done some trials.

“I was in a room with a number of people who were in the target range – six to eight years from retirement – sitting with them for two hours and having a really good roundtable discussion with them about their options. It is about finding ways to target the resource that we have to add as much value as we can to the individuals at an individual level. That is the Holy Grail for us,” Sullivan stated.

    Share Story:
Spotlight on pensions tracing: making huge strides in a changing world
Alex Mitchell, Head of Tracing & Data Solutions at Capita, meets Francesca Fabrizi, Editor in Chief of Pensions Age to discuss recent trends in the pensions tracing space

MAC strategies in focus
Francesca Fabrizi meets Craig Scordellis, Head of Long-Only Multi-Asset Credit at CQS, to discuss what MAC strategies can offer pension schemes today