Giving members some choice has long been a part of the DB pensions system. The opportunity to take a tax-free lump sum at retirement or, prior to retirement, take a cash equivalent transfer value are both long established options which are available to all. However, in response to the changing needs of members, more and more pension schemes have been adding new options to the menu such as pension increase exchange (PIE), bridging pension options and partial transfer options. Now more than ever, it is important members have support alongside this choice to ensure they understand the available options and make decisions appropriate to their unique situations.
Member options are not only a great opportunity for members by giving them choices they value, but these bring many benefits for trustees and scheme sponsors too. Many options have the effect of accelerating payments, reducing risks such as inflation risk or removing the financial risk of meeting the liability completely in the case of a transfer value. This helps those running the scheme to plan because the scheme’s finances are more predictable. Increasingly, member options are therefore an integral part of schemes’ journey plans whether these end in buyout or the scheme intends to run on for many years.
More choice is great for members as it allows them the most flexibility to shape their retirement benefits to best fit their individual needs. However, with choice comes the need to help members choose because these decisions are complicated, have significant financial implications and really do last a lifetime in many cases. The direction of travel for a number of years has been for trustees and scheme sponsors to introduce more support around retirement decision making – from better communication of the options through to online modelling tools and independent financial advice for members. This goes hand in hand with the new and existing member options which are made available.
Aon is well placed to help trustees and sponsors consider which member option solutions best meets their needs. We have a dedicated Member Options team comprising over 65 specialists, providing advice and 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 projects such as settlement and GMP equalisation. With specialist knowledge, Aon have developed modelling tools to help schemes design the most effective exercise, given a scheme’s objectives and membership profile. Furthermore since 2018, Aon’s Member Options team have collectively spent over 120,000 hours on member options projects, with over 30,000 hours dedicated to research and development.
Get in touch with our Member Options Specialists
An easy-to-use, web-based tool helping members understand and identify the best pension choices for them.
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