UK - Final salary scheme trustees can slash costs by using impaired or enhanced annuities, GE Life claims.
GE Life calculates that a 10-member scheme – where each member retires on a pension of two-thirds of national average earnings at 60 – could save over £300,000 by using impaired or enhanced annuity options.
Impaired and enhanced annuities provide policyholders with cheaper annuities if they suffer from poor health or have other reasons for a reduction in their life expectancy.
Head of strategy Dave Lowe explained: “If trustees of schemes were to investigate whether an impaired life annuity would be appropriate for a particular individual, they could save the scheme considerable amounts of money.”
And he added: “With current markets having an adverse effect on the value of pension funds, trustees and their advisers must seek out the most cost-effective solutions.”
But Mercer Human Resource Consulting European principal and consulting actuary Costas Yiasoumi said many schemes did not know which of their members would be entitled to an impaired or enhanced annuity – which would make it very difficult to use such a product for larger schemes.
However, he added that if a scheme had a handful of members with very large pensions, it could be worth trying to obtain information on impaired annuities given the size of the savings that could be achieved.
“If a large scheme was using it, it would probably set up a filter process where it would identify members who had benefits large enough to justify pursuing it further.”
Scottish Widows has completed a bulk annuity deal for the Hitachi UK Limited Pension Scheme.
The lifetime allowance will rise to £1,054,800 from April next year as the Office for National Statistics (ONS) recorded inflation at 2.4% in the year to September.
The national procurement frameworks for the Local Government Pension Scheme (LGPS) has been expanded to include member data services.
The government is seeking ways to ensure "parity" of compensation treatment between Financial Assistance Scheme (FAS) members from solvent and insolvent schemes.