Management Consulting
Aon
Full Credential Description
Defined contribution (DC) pension schemes have been designed to guide members seamlessly up to retirement, but as they approach this significant milestone, members face complex decisions regarding their pension pots. The introduction of Pensions Freedoms in 2015 allowed savers to choose how they take their DC benefits, shifting the responsibility of decision-making onto individuals. This has created a challenging environment for retirees, who must navigate choices between annuities, drawdown, cash, or a combination thereof, with the knowledge that these decisions are irreversible. To address these challenges, effective support from pension schemes is essential. Many members lack a clear plan for their retirement, with only 29% of 55-59-year-olds reporting they had a clear strategy for accessing their DC pension. The recent changes in government policy regarding inheritance tax further complicate the decision-making process for retirees. Therefore, it is crucial for pension schemes to engage with members early and provide comprehensive support. Aons 2024 survey highlighted that many DC schemes are recognizing the need for enhanced retirement support. The survey, which included schemes managing the retirement savings of around one million DC savers with combined assets exceeding £60 billion, found that a significant majority of respondents provide retirement planning tools (81%) and access to pre-retirement workshops (55%). These workshops can range from generic education sessions to tailored seminars and one-on-one coaching, aimed at helping members understand their options and make informed decisions. Moreover, over 50% of schemes offer access to annuity broking or guidance services, which are crucial for members looking to purchase annuities. However, it is important for trustees and employers to ensure that these services are not limited to specific providers, as this could restrict members' access to the best options available in the market. Additionally, 35% of schemes provide access to preferred financial advisers, often at reduced rates, which can further assist members in navigating their retirement choices. The anticipated legislative changes will mandate trustees to provide members with access to drawdown and annuity options, emphasizing the need for comprehensive support systems. Trustees are encouraged to partner with external providers to enhance the quality of services offered to members. By improving the retirement support framework, trustees and employers can significantly enhance retirement outcomes for members, reduce the risk of poor decision-making, and potentially improve employee retention.