This year’s survey - the sixth from Aon – collected the views of over 300 UK DB schemes. The results showed that 37 per cent of the schemes surveyed provide, or shortly plan to provide, additional support to members through online modellers and/or access to independent financial advice. This confirms the consistent upward trend observed since 2019. Over half of the respondents 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: “In this year’s survey results there is a clear continuing trend of schemes providing members with more support when making retirement decisions – all helping to build a more resilient workforce. 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 4 to 5 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.”
IFA Support
The survey results reveal a spectrum of approaches when it comes to offering IFA support to members. When IFA advice is provided, and in the majority of cases (63 per cent), it is paid for by the scheme trustee or corporate sponsor on behalf of the member. There has 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.
However, fully paid-for advice saw a slight reduction from last year’s survey, continuing the trend from 2022. This year, 25 per cent of schemes said they provide access to a preferred IFA but members are 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.
Kelly Hurren said: “The financial choices to be made around retirement are among the most important an individual can make. Support from a qualified expert can help them make better decisions and be confident in their decision – regardless of whether individuals choose to retire from a scheme or transfer elsewhere.
“If a scheme is hoping to maximise engagement with the IFA, then providing paid-for financial advice is the single biggest thing it can do to achieve that objective. Even where advice is subsidised on behalf of the member, engagement is typically much lower. But even in these situations, there are still significant member benefits to doing this. A scheme-appointed adviser can help overcome barriers such as availability, credibility and the costs associated with high street IFAs.”
Bulk member options exercises
This year’s survey showed that where schemes are targeting buyout, trustees are increasingly considering 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 are 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.
Kelly Hurren said: “A key consideration is that after a buyout transaction, member options and access to support will change. If schemes are heading towards an insurance transaction, trustees increasingly view it as good governance to communicate with members about their options before they change completely following the transaction. This is particularly true where schemes have made strong support available to members - such as IFA guidance or educational modellers - which wouldn’t be available after buyout.”
The survey showed that just under 25 per cent of 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
In previous years the survey looked at GMP equalisation solutions for pensioner members, but this year it focused on the approaches followed for non-pensioner members.
Just over 60 per cent of schemes surveyed have already decided on a GMP equalisation method for non-pensioners. The vast majority of schemes (80 per cent) that are implementing conversion at retirement are adding additional member options such as PIE or BPO. However, almost a third (27 per cent) of schemes doing bulk conversion are also making member options such as these available. For schemes choosing a dual records approach, a small proportion of schemes (5 per cent) already have member options such as PIE or BPO available to their members.
Kelly Hurren said: “Given the changes required to administration processes and communications for implementing GMP equalisation, some schemes are using the project as an opportunity to bring extra value to members by offering additional retirement options. This approach may also offset some of the liability costs associated with GMP equalisation.
“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.”
‘Member Options Survey 2023’ is available here.
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