Management Consulting

Aon has identified a growing trend among UK pension schemes to combine Guaranteed Minimum Pension (GMP) conversion with Pension Increase Exchange (PIE) exercises. This approach addresses the challenges posed by GMP equalisation, which had previously been viewed as a barrier to implementing member options exercises. Following the Lloyds judgment in 2018, many schemes were hesitant to proceed with member options due to the complexities of GMP equalisation. However, recent insights indicate that approximately 59% of pension professionals now view the combination of GMP conversion and PIE as a beneficial strategy. The tailored solution of integrating GMP conversion with PIE allows schemes to unlock additional savings and enhance member engagement. By addressing the drawbacks of GMP conversion simultaneously with PIE, schemes can facilitate more informed decision-making for members regarding their retirement benefits. This dual approach not only reduces implementation costs—since there is significant overlap between the two projects—but also increases member participation, as individuals are not tied to their current pension arrangements. Key considerations for successful implementation include effective communication focused on members' benefit options and the provision of independent financial advice (IFA) to assist members in evaluating their choices. Historically, around 60% of members seek advice during PIE exercises, and this figure is expected to rise when combined with GMP conversion. This strategy not only streamlines the process but also enhances the overall member experience, leading to better outcomes for pension scheme participants.