Management Consulting

Defined benefit (DB) trustees are currently navigating a complex risk landscape, compounded by increased regulatory burdens and political uncertainty. Despite these challenges, Aon's 2023/24 Global Pension Risk Survey indicates that trustees are prioritizing member support to enhance retirement planning outcomes. Specifically, 48% of DB schemes are either providing or planning to provide access to independent financial advisers, recognizing the importance of helping members understand their retirement choices. To address the dual pressures of compliance and member support, Aon identified several strategies that trustees are implementing. For instance, 75% of schemes undergoing Guaranteed Minimum Pension (GMP) equalization are offering or planning to offer deferred members options such as pension increase exchanges (PIE) or bridging pensions options (BPO). This approach not only fulfills compliance requirements but also enhances member support by providing additional financial flexibility. Furthermore, as schemes approach buyout, it becomes crucial for trustees to communicate the implications of this transition to members. The average time for schemes to reach their long-term targets is now just 7.8 years, leading to a rise in bulk transfer value communications from 37% in 2021 to 42% in 2023. This proactive communication helps members make informed decisions regarding their options before buyout, ensuring they are aware of how their choices may change post-transition. Aon also highlights the growing interest in BPOs, which allow members retiring before their state pension age to receive higher workplace pension payments until they become eligible for state benefits. The survey revealed a significant increase in the availability of BPOs, with 30% of schemes now offering or planning to offer this option, up from just 12% in 2021. This shift reflects a broader commitment to providing members with flexible retirement planning tools that can help mitigate financial pressures, such as the current cost of living. In summary, Aon's findings underscore the importance of integrating member support into the broader framework of pension management, ensuring that trustees not only comply with regulatory demands but also enhance the financial well-being of their members through informed decision-making and tailored support options.