BT will soon roll out a trial advice offering for its active defined benefit (DB) members to help them make more informed choices.
The pilot which is in the final stages of development is designed to provide advice on all the options available to members who have a "matrix of choices" at retirement, according to BT Pension Scheme pensions director Kevin O'Boyle.
This includes a choice of increasing pension commutation, increasing pension without commutation, increasing pension with commutation with asset-backed contributions taken as cash, or a pension exchange option.
The pilot will also provide advice on cash-out transfer values, and will include paying for financial advice. It is hoped the pilot will eventually become part of BT's financial planning.
O'Boyle said this will give active members the ability to make correct decisions. It comes as the introduction of freedom and choice has opened the possibility of members transferring their DB pots into defined contribution schemes to take advantage of the flexibilities. Although, O'Boyle said no BT active members had yet used the freedoms.
"There are a lot of administration and communication aspects associated with DB options," he added. "A lot of people may just have a 10 minute conversation and then go through a longer process in due course."
He stressed the need for members to have clear and independent financial advice. Not providing it could be a "real danger" for members making poor retirement outcomes or opportunities if they are un-engaged.
"We [the industry] have administration and communication issues. The truth is can most administration teams deal with this at present, not only producing all those permutation of calculations or directing them to an independent financial adviser or by plugging something into Google? Do present communications to members approaching retirement explain all the options? I doubt it very much."
"Where members are not told about the full range of options and subsequently realise a transfer value would have been more appropriate and complains, whose fault is it? Does having an asterisk at the bottom of the page to highlight that the onus lies on members pass the sniff test and help people in retirement?
"We recognise at BT that engagement is crucial and particularly in the run-up to retirement because there's a real danger people will make the wrong decisions if they're not engaged and this will lead to poor retirement outcomes or opportunities. Members require clear explanations and potentially independent financial advice."
O'Boyle was speaking at the Barnett Waddingham Pensions and Benefits Conference on 21 June.
The communications giant has around 600 people retiring each month, which is roughly split into 200 actives and 400 deferred members. It also has over 200,000 pensioners with 75,000 deferred members and 35,000 active members of which around 25,000 are over 50.
BT is already providing access to modelling tools and guidance for its members so they can explore their retirement options, including a modeller for those affected by annual allowance and lifetime allowance. Members can look at the impact each year and predict when could be a good time to retire based on the value of their core benefits.
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