On the go: The coronavirus pandemic has led to an increase in the number of defined benefit scheme members looking to bridging pensions, according to a report by Aon.
The report details the responses of 124 pension professionals polled during an Aon webinar, in which 50 per cent of respondents confirmed their interest in bridging pensions and a further 12 per cent said they already had such an option in their scheme.
Though they can work in a number of ways, the general purpose of a bridging pension is to enable retirees who stop work before they reach the state pension age to maintain the same level of income throughout retirement.
Members can access an increased pension and tax-free lump sum in the early years of retirement, in exchange for a lower payment from their occupational scheme once the state pension kicks in.
Commenting on the finding, Kelly Hurren, head of member options at Aon, said: “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.”
As reportedin the Financial Times last week, the consensus view among financial advisers is that choosing early retirement during the coronavirus crisis is a bad idea. But the reality is that many people will be forced into it, with over-55s who are made redundant being less likely than younger people to find new employment.
Ms Hurren said: “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.
“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,” she added.
With the financial consequences of lockdown hitting increasingly hard, the need for flexibility is driving both schemes and their members to look for alternatives to their now-uncertain retirement plans, Ms Hurren said.
“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.”
