When asked during a recent Aon webinar, 59% of the 124 pension professionals polled, said that they considered combining GMP conversion and PIE to be a positive solution. Of the schemes interested, around two-thirds see this as a good way to unlock further savings from PIE and around a third see combining the exercises as a good way to overcome some of the drawbacks of GMP conversion.
Tom Yorath, partner and head of GMP equalisation services at Aon, said: “In the immediate aftermath of the Lloyds judgment in 2018, GMP Equalisation was seen as a barrier to getting on with many of the things that schemes would otherwise have been doing, for example member options exercises such as a Pension Increase Exchange. Following a period of schemes overcoming and managing those barriers, we are now seeing many schemes exploring the use of GMP conversion to achieve a more effective member options exercise and to deliver better outcomes for their members.
“For some schemes, a dual-records approach is clearly the right answer – our previous polling has suggested around half of schemes will go for this approach. That said, many schemes who were on the fence are increasingly finding that combining GMP conversion and PIE brings significant benefits and removes implementation barriers. These combined exercises can lead to higher member engagement and take-up, than a standard PIE exercise, as members are not anchored to a current pension and can instead make fully informed decisions about their retirement benefits. From an implementation perspective, there is significant overlap between the two projects and doing both at the same time costs less than running each project separately.”
Kelly Hurren, head of Member Options at Aon, said: “If a scheme is already thinking of running a PIE exercise, GMP conversion allows it to maximise the benefits and effectively kill two birds with one stone. If a scheme is considering conversion, then going through PIE at the same time is an opportunity to deliver conversion while addressing many of the drawbacks head on.
“However, there are still some key considerations for schemes when guiding members through the conversion and PIE process. The first of these is communication, which needs to be kept simple and clearly focused on members’ benefit options. The second is advice, as paid-for advice from an IFA would need to be provided to help members decide whether the PIE is the right fit for their personal circumstances. Typically, around 60% of members take advice in PIE exercises – and we would expect this to be even higher when combined with conversion. This can also be an opportunity for members to get guidance or explanation from the IFA around the impact of the GMP conversion on their benefits.”
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