Controlling the cost of member options
Providing defined benefit scheme members with alternatives to a pension from normal retirement age is common within occupational plans. Options including transfers to other pension arrangements, early or late retirement, exchanging pensions for a lump sum and the purchase of an additional pension through AVCs all proffer much needed flexibility for employees.
However, while the benefits to members are clear, it is important that providing such alternatives does not result in an uncontrollable cost burden for the employer. Companies need to ensure that the terms of alternative arrangements are not so generous that they become significantly more expensive than the standard pension provision, and the measures used by trustees to cost the different options are appropriate.
Punter Southall’s Employer Consulting team can support employers by:
- Identifying who has the power to set the options set out in the Trust Deed and Rules
- Reviewing the existing options and considering where they need updating
- Explaining the cost outcomes of providing alternatives to the normal retirement pension
- Providing analysis of the different measurements of cost and the arguments for and against each one
- Working with trustees to reach agreement on the best approach
- Ensuring the alternative options remain affordable for the employer.
The following case study reveals more about how Punter Southall’s Employer Consulting team helped one employer control the costs of member options.
For further information contact Danny Vassiliades by email or on 020 7839 8600.
