Member options

Offering members greater flexibility with their retirement benefits can be an attractive proposition for all parties involved. Members will be given the opportunity to receive their benefits in a form more suited to their individual circumstances, while trustees can use member options as a way of reducing risk in the scheme and bridging the gap to their long-term objective. Employers could also see a reduction in future contributions and administration expenses.

Our experts can help pension schemes by designing and implementing a wide range of member options, including:

Transfer-out options

Following the pensions freedoms introduced in 2015, members over age 55 can access their benefits more flexibly if they transfer to a defined contribution (DC) scheme. We can help trustees of DB schemes provide their members with the support they need to decide whether transferring is right for them, for example:

• Drafting communications to members outlining the potential benefits and drawbacks of transferring
• Ensuring members are aware of the transfer-out option e.g. including quotations in retirement packs or annual benefit statements
• Enhancing the transfer offering e.g. increasing the general level of transfer values, running an enhanced bulk transfer exercise, or offering a partial transfer option
• Assisting members in reviewing transfer value quotations e.g. partnering with a specialist IFA and/or subsidising the advice cost.

As well as offering greater flexibility to members, transfer-out options can reduce risk (and administration costs) in the scheme, improve the scheme’s funding position, and bring the scheme closer to the trustees’ long-term objective. We can help trustees design a transfer-out option which meets the needs of both the members and the scheme.

Pension increase exchange (PIE) options

Sometimes the pension increases offered under the scheme’s rules do not meet all members’ needs. For example, a low starting pension with generous future increases might not be appropriate for a member who wants to enjoy the early years of their retirement. Giving members the opportunity to receive a higher starting pension with lower future pension increase can be an attractive offering to members. 

As well as providing greater flexibility to members, a PIE option can reduce risk and bring the scheme closer to the trustees’ long-term objective. It may even be possible to combine the PIE offering with a GMP conversion exercise.

We have experience of helping trustees’ with bulk PIE exercises for pensioner members, as well as ‘at retirement’ PIE offerings for non-pensioner members. Our specialist communications team can help trustees draft easy-to-understand communications to members, ensuring that members understand the options available to them and the consequences of the choices being made.

Trivial commutation exercises

Members with very small benefits may prefer to receive all of their benefits in a one-off lump sum, rather than a small annual pension for life, and may not be aware of the options available to them. Running a trivial commutation (or small lump sum) exercise highlights this option to members. From a trustee perspective, a trivial commutation exercise will reduce risk in the scheme and can lead to a significant reduction in administration costs. 

We have helped a number of schemes carry out trivial commutation exercises in recent years. We have found that take-up rates for trivial commutation exercises tend to be high, particularly if the offering is properly communicated to members.

Other exercises

We can also help pension schemes with other member options, including early retirement exercises, bridging pensions, and GMP conversion.