Schemes and members seek increased flexibility to deal with times ahead
LONDON (15 June 2020) – Aon plc, a leading global professional services firm providing a broad range of risk, retirement and health solutions, has said that one unexpected result of the COVID-19 pandemic is the increase in attention being given to bridging pensions from both pension schemes and their members. Bridging pensions give members the option to access more pension earlier in their retirement, as well as enabling them to take a bigger tax-free cash lump sum.
When asked on a recent Aon webinar, 50% of the 124 pension professionals polled, said that they were interested in bridging pensions as a way of offering flexibility in their defined benefit pension schemes. Another 12% of the webinar audience said that they already have the option available in their schemes.
Kelly Hurren, head of Member Options at Aon, said:
“We believe there are a number of reasons for bridging pensions seeing this surge in interest. We have already seen in the lockdown period an increase in people reviewing their personal finances and therefore their retirement options too. From the member side, this interest in bridging pensions may well be a product of that, with people viewing their options and seeing the possibility of a gap between their retirement and reaching the State Pension Age – and wondering how they bridge that.
“There’s nothing actually new in bridging pensions. Some schemes have had them for a while and they do what they say: re-shaping a member's standard pension to bridge the gap between a scheme member’s retirement and their state pension date. This enables a potentially smoother set of payments across retirement and also enables individuals to take a bigger tax-free cash lump sum. Most schemes experience a liability saving when a member takes a tax-free cash lump sum - so providing members with a larger sum increases these savings for the scheme.
Kelly Hurren continued:
“The likelihood of recession and with it, the prospect of more people taking early retirement – or, sadly, finding they need to take it as a result of redundancy – means scheme members are becoming increasingly aware of the need to cover a financial gap that could stretch for 10 years or more. Others may simply be looking for increased flexibility – perhaps to help family members financially.
“It may well be a sign of the times, that we have seen a sudden rise in interest both on our webinar and actively from clients wanting to exploring this option. Flexibility has been a keynote for pension schemes in the last few years and now – given the economic circumstances we are facing – it may be that both schemes and members are thinking alike and looking to explore what flexibility is possible and how it can improve both the scheme and personal circumstances.”
Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.
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