LONDON (01 December 2016) – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has highlighted that many UK defined benefit (DB) pensions schemes may be missing an opportunity to reduce their pension risk.
A poll of 200 Aon Hewitt UK clients with DB schemes showed that less than 10 per cent of them currently provide independent financial advice for members at retirement. As a result, scheme members may not be aware of all of the options available to them – including the opportunity to transfer their assets to a defined contribution (DC) scheme - thus taking advantage of pension freedoms.
Where a member does decide to transfer out from DB to DC, based on their individual circumstances and following independent advice on all the options, the pension scheme itself can benefit from a reduction in its overall risk. This then accelerates the scheme along its flightpath to pension stability.
Ben Roe, partner and head of Member Options at Aon Hewitt, said:
“Providing members with a complete picture of their financial situation and options at retirement should be a key priority for all UK pension schemes – it’s in the best interests of both the member and the scheme. We have seen a significant variability in transfer activity among clients depending on the level of information members receive and the additional support they are provided. In general transfer activity is low, but we have seen around 30-40 per cent of transfers happening when members are automatically provided with transfer value quotes and access to independent advice at retirement.
“By addressing these discrepancies, trustees and sponsors can ensure better member outcomes, but critically, they can also achieve cost savings against key funding and accounting measures. However, it’s important that schemes provide access for members to good quality, independent financial advice. There will be circumstances when transferring out will not be in the best interests of the member.”
Aon Retirement Options Model
Having noted a lack of comprehensive pension modelling available for DB pension scheme members, Aon Hewitt has launched the Aon Retirement Options Model. It is an online educational tool which provides DB members with the support they need to understand their own available options and to make informed choices at retirement. Importantly, it bridges the gap between education and full independent financial advice by making complex retirement options simple and delivering timely, affordable and easy access to the IFA market.
Ben Roe said:
“It is important to balance the needs and objectives of both trustees and scheme sponsors by delivering better member outcomes in a cost effective and efficient way. Enabling members to make the right decision for their circumstances could lead to more liabilities being transferred out of the scheme, ultimately helping schemes move closer to pension stability by reducing pension risk.”
Key features of the Aon Retirement Options Model:
• Member data can be pre-loaded by the scheme administrator
• Offers secure access to sophisticated models that summarise the alternatives into easy to understand choices that demonstrate the impact of each potential option
• Can be customised so members can tailor the model to their personal circumstances and attitude to risk
• Easier access to independent financial advice at competitive prices for those who need advice.
Notes to Editors
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 72,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com.
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