Understanding member options: A win-win opportunity for all?

Understanding member options: A win-win opportunity for all?

Member options often provide a win-win opportunity for all stakeholders involved in a pension scheme. Here, Aon analyses the different options available and why trustees and companies are making them available to pension scheme members.

Member options (commutation, early retirement, late retirement, etc) have existed for many years, but in 2014 the UK government announced freedom and choice in pensions. This big bang moment changed the face of pensions flexibility for members. Instantly members could take their entire pension as a lump sum and they no longer had to buy an annuity with their defined contribution (DC) pension. This change drove innovation in member options and there a number that are available today. 

Why would trustees and companies offer these options?

Trustees are frequently considering offering more member options to provide greater flexibility to members when drawing their retirement income. It is important to trustees that these options are clearly communicated and their pension fund members make informed choices about their pension. This drives a successful member options exercise for the member, the trustee and the company.

Companies similarly have an interest in providing greater flexibility to members. However, they also often have a focus on managing their pension risk. Member option exercises allow the alignment of greater freedom for members with risk reduction and improved insurer pricing for the sponsor by reshaping/shrinking the sponsor's pension liability resulting in a win-win for all parties.

Aon expects member options exercises to continue to flourish as members benefit from increased freedom in shaping their retirement incomes

Click here to read Aon's Guide to Risk Settlement and to learn more about flexible retirement options, enhanced transfer values and pension increase exchange freedoms; and how they help pension schemes on their journey to buyout.

More on Uncategorised

UK Pensions Awards 2019 - The night in pictures

UK Pensions Awards 2019 - The night in pictures

Here they are...all the pictures from the UK Pensions Awards 2019.

PP Online
clock 24 May 2019 •
PP Rising Star Awards - The Winners

PP Rising Star Awards - The Winners

Here they are - the winners of the inaugural Professional Pensions Rising Star Awards...

Jonathan Stapleton
clock 28 March 2019 •
Equity Pension Scheme members want a transition to green investments

Actors call on Aviva to swap to low-carbon default

Academy Award-winning actors have called on Aviva to set up a low-carbon default fund for the £110m Equity Pension Scheme.

James Phillips
clock 23 October 2017 •