Pension scheme members want more retirement decision help

Aon’s 2021 Member Options Survey, published today, has revealed that there continues to be a clear trend for schemes to provide members with more support for their retirement decisions.

The survey, which asked for views of 316 pension schemes, revealed a new trend that 10% of schemes now provide members with fully-paid for or subsidised independent financail adviser (IFA) advice for defined contribution (DC) members and it concluded that the trend is expected to continue as DC becomes the focus for current employees going forward.

It also said a new observation for the 2021 survey was an increasing focus on DC members, as schemes look to replace ‘old-style annuity brokers with ‘whole of market’ IFAs who can advise on drawdown and annuity products.

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Commenting on the data, Kelly Hurren (pictured), principal consultant and head of member options at Aon, said: “There continues to be a clear trend for schemes to provide members with more support with their retirement decisions. This year, we saw that half the schemes surveyed quoted transfer values in retirement packs or shortly plan to do so.

“Of these schemes, 60% are also providing additional support at retirement through educational online modellers and/or access to regulated financial advice.”

Demand for making correct retirement decisions was particularly marked due to Covid-19 (Coronavirus). Said Hurren: “Where schemes had made decisions to close schemes to future accrual or to implement benefit changes pre-pandemic, we have seen that the uncertainty caused by COVID-19 has brought into greater focus the need to support members with their retirement decisions. This has particularly been evident where members are facing an earlier-than-planned retirement alongside redundancy.”

But, while recognising the important role the Financial Conduct Authority (FCA) now gives to trustees in educating members around their options, Hurren was critical about elements of FCA guidance on options outside schemes.

She said: “Our experience is that the leap from generic information to formal regulated advice is too great for many pension scheme members and that educational online tools play a vital role in bridging this gap. Sensible judgement of the guidance will therefore be needed to ensure that the industry’s progress in educating members over recent years continues, and particularly at a time when members are likely to need this support more than ever.”

The report also revealed that during the 2020 Covid-19 (Coronavirus) pandemic, there was increased scam activity.

It found that while two-thirds of schemes have already signed up to the Pension Regulator’s (TPR) pledge to protect scheme members, it also cautioned that recent guidance from the FCA will require careful interpretation by trustees to ensure member support remains consistent with the guidance and continues to be effective for members.