Pension flexibilities: Impact on DB schemes two years in

We are now two years into an era of freedom and choice in defined contribution (DC) retirement savings. For members of a defined benefit (DB) scheme, making the most of these flexibilities will involve transferring to a DC arrangement.

The flexibility on offer to UK pension savers is proving to be popular – the Government has confirmed that the extent to which individuals are accessing their DC savings has surpassed initial estimates. Indeed, the changes have prompted a genuine interest from DB members to explore such options in more detail. Many trustees and employers have had to react promptly, for example ensuring that scheme communications are up-to-date and seeking to clarify scheme rules.

This note provides an update on the lay of the land and sets out how employers can make the most of this to reduce long-term costs. We believe that the new regime offers positive opportunities for trustees and employers alike to mitigate a material level of risk within the scheme whilst also providing members with a potentially valuable option.