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Pension flexibility for DB members becoming the new norm, says research

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Growing numbers of defined benefit (DB) pension scheme members are adopting additional options offered to them since the introduction of “freedom and choice” reforms, according to research from Willis Towers Watson.

Over half (55 per cent) of the members of DB schemes who spoke to a financial adviser last year chose to transfer out of their DB schemes to access the flexibilities introduced by April 2015’s freedom and choice reforms. This is significantly higher than the previous year’s take-up, when just over one-third (36 per cent) opted to transfer.
 
There has also been an increase in the take-up of pension increase exchange (PIE) options which allow members who have already retired to reshape their pensions. Some 35 per cent of members given the choice of PIE took the option last year, compared with 27 per cent the previous year.
 
The survey captures the experience of DB schemes which actively inform members about options outside the scheme and facilitate access to paid-for financial advice with an impartial adviser.
 
Stewart Patterson, head of liability management at Willis Towers Watson, says: “Increasingly, many members of DB schemes are recognising that by transferring out of their scheme they may be able to achieve a pattern of retirement income that better suits their needs than the more traditional DB pension. Transferring will not be the right decision for everyone, though, and an impartial financial adviser can help members to make the right decision for their individual circumstances.
 
“The results of our survey clearly demonstrate that members value flexibility over their retirement savings and many members now expect their schemes to provide access to a greater range of options. Coupled with the benefits for members, expanding member options can reduce the level of risk in a pension scheme and improve its funding position. We now expect those schemes where a ‘wait and see’ approach was adopted post-pensions freedom to move to further facilitate access to transfers at retirement. We predict that over the next few years pension flexibility for members of DB schemes will become the new norm.”
 
Willis Towers Watson surveyed financial advisers and combined this with its own experience to find out what over 170,000 DB members in 350 schemes have chosen to do in the two years since April 2015 when offered access to flexibility.

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