DB schemes: Surge in retirement support for members says Aon

In its annual member options survey, pensions consultancy Aon said it was seeing a continuation of the trend for UK defined benefit (DB) schemes to give members more information and support.

The sixth annual Aon members survey included the views of over 300 UK DB schemes.

If found 37 per cent of the schemes provided, or shortly planned to provide, additional support to members through online modellers and/or access to pensions advice via an independent financial adviser. 

Provision of advice has shown a consistent upward trend since 2019, Aon noted that over half of the respondents also currently provide, or shortly plan to provide, members with transfer value figures in their retirement packs. 

Kelly Hurren, partner and head of member options at Aon, said schemes were helping to build a more resilient workforce. She added: "Schemes doing the bare minimum of just responding to transfer requests on a statutory basis are very much in the minority."

"While most schemes now provide transfer value figures in retirement packs, it’s encouraging to see that many schemes go further and provide members with educational tools or access to an independent financial adviser (IFA) to help them understand that information. We have seen the proportion of schemes taking this approach nudge up by four to five per cent each year and, based on this trend, our expectation is that we will get to a place in the next few years where around half of all schemes are offering educational tools and/or IFA support.”

Independent pensions advice

The survey results showed that when IFA advice was provided, 63 per cent of scheme trustees or corporate sponsors paid on behalf of the member. It noted there had also been a small shift towards advice being paid for solely by the trustee or shared in some way between the trustee and the sponsor. 

Fully paid-for advice fell slightly when compared to last year’s survey, with 25 per cent of schemes providing access to a preferred IFA but with members expected to meet the cost of advice themselves. This is usually at a much lower cost in comparison to ‘high street’ prices because the scheme has paid to set-up and educate the IFA on the scheme’s benefits. 

Bulk member options exercises

Where schemes are targeting buyout, trustees are more likely to consider the support available to members compared with what would be available from an insurer. This includes access to modellers or IFAs and different options such as pension increase exchanges (PIE)or bridging pension options (BPO).  

Among the schemes in the survey, 30 per cent were planning to write to members on a bulk basis before buyout, with the aim of reminding them of their options and of the support available - before it changes irrevocably for them.

The survey showed that just under 25 per centof the schemes surveyed place a high importance on member options/support when considering possible buyout dates. Currently, only 4 per cent of schemes would actually delay a transaction in order to retain support or options for members, but 19 per cent of schemes would hope to retain some of this support after a buyout. 

GMP Equalisation

Up until this year the survey looked at GMP equalisation solutions for pensioner members, but this year it focused on the approaches followed for non-pensioner members.  

It found that over 60 per cent of schemes had already decided on a GMP equalisation method for non-pensioners. The vast majority of schemes were implementing conversion at retirement, adding additional member options such as PIE or BPO.

Almost a third - 27 per cent -  of schemes doing bulk conversion made member options such as these available. For schemes choosing a dual records approach, a small proportion of schemes - five per cent -  already had member options such as PIE or BPO available to their members. 

Hurran said: “ “Our survey showed that most schemes taking this approach have chosen GMP conversion as their GMP equalisation solution. Schemes that have chosen a dual records solution can still offer options to their members at retirement but will need to give careful consideration to the approach used to implement this.”