Providing members with choices has been a fundamental aspect of the defined benefit (DB) pensions system. Options such as taking a tax-free lump sum at retirement or opting for a cash equivalent transfer value before retirement havebeen long-standing features available to all.
In response to evolving member needs, many pension schemes are now offering additional options and support, including, pension increase exchange (PIE), bridging pension option (BPO), and partial transfer options.
It is crucial that members receive adequate support to understand these options and make informed decisions tailored to their individual circumstances. While increased choice offers members flexibility to tailor their retirementbenefits to their specific needs, it also necessitates guidance to help them navigate these complex decisions, which have substantial financial implications and often last a lifetime. Trustees and scheme sponsors have been progressively enhancing support forretirement decision-making, including improved communication of options, online modelling tools, and independent financial advice for members. This support complements both new and existing member options.
Advantages of Member Options and Support
Member options not only offer valuable choices to members but also provide significant benefits to trustees and scheme sponsors. These options can accelerate payments, mitigate risks such as inflation risk, or eliminate the financialrisk of fulfilling liabilities entirely in the case of a transfer value. This predictability in scheme finances aids in planning for those managing the scheme. Consequently, member options are increasingly becoming a vital component of schemes' strategic plans,whether they culminate in buyout or continue for many years.
Aon is well placed to help trustees and sponsors consider which member option solutions best meets their needs. We have the industry’s largest dedicated Member Options and Support team comprising over 65 specialists, providing adviceand support on the full range of member options, including flexible retirement and pension increase conversion exercises. We are seeing trustees and companies value the increasing benefits of running member options exercises in conjunction with wider projectssuch as settlement and GMP equalisation.
If you would like to find out more or discuss further, please contact your usual Aon contact or email us at [email protected].
