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In part one of this series, we looked at what options are being made available to members of DB schemes. We saw that a growing number of DB members are being given an increasing array of options as trustees look to broaden member choice.
In part two of our series, following our in-depth research across 50 trustees and over 1,000 members of Defined Benefit (DB) schemes, we continue along this theme by taking a look at the support offered to DB scheme members at retirement.
The gender divide
We started by asking members how much support they had from their DB scheme when it came to making decisions about their retirement. Overall, just under 50% of members believed they weren't getting adequate support. This was fairly stable across the different age ranges, including members aged 55 and over.
Where there was a significant difference was in the responses from men and women.
67% of men felt they had some or a lot of support, compared to only 42% of women.
36% of women felt they had not had any support but would like some, compared to only 17% of men.
Previous research we have carried out has identified a significant gender pension gap, with women having 40% less in pension savings than men on average (source). With such a large disparity, it is perhaps no surprise there is more demand for support from women than men, though other factors may also be feeding into this. It could be there is a different interpretation between men and women of what constitutes ‘support’, or that men are less likely to admit that they need support.
Regardless of the cause of the difference, our research suggests that women, in particular, would value additional support in this area – and, given the gender pensions gap, are arguably in most need of it.
Partnering with IFA firms
Having asked about members' experiences of getting support, we asked trustees what support they actually provide to members. One area of focus of our research was the prevalence of schemes partnering with Independent Financial Advisor (IFA) firms to provide advice to members at retirement.
48% of trustees said that they had seen schemes partner with a specialist IFA, with the scheme or sponsor meeting the cost of advice. 40% had seen the same but with the member meeting the cost of advice.
We asked the same question of the audience at our recent DB Conference session on the topic of Member Options. 24% of the audience said that their scheme partnered with an IFA to provide members with advice at retirement (funded either by the member, scheme or sponsor).
Finally, we asked members for their views on schemes providing access to an IFA to provide advice at retirment. Of the 50% of members who indicated they had been offered some or a lot of support from their scheme, 22% said that the scheme offered paid-for financial advice from an IFA appointed by the scheme. This increased slightly to 24% when considering arrangements where the member paid for the advice.
All the results above paint a fairly consistent picture, which shows that a sizeable minority of schemes are providing access to an IFA to help members get good quality financial advice.
However, the proportion of schemes taking this action contrasted with the much higher proportion – 76% – of trustees who believed that schemes should be partnering with an IFA to support members – suggesting this is a trend that will grow over time.
We have certainly seen continued demand from schemes to partner with specialist IFA firms directly and expect this positive trend will continue. Our research shows that such a trend would be well-valued by members. We asked members about their views on taking financial advice at retirement: 70% of members said they planned to take financial advice at retirement, and 82% said they would use an IFA appointed by the scheme.
From the member’s perspective, of those who indicated they were provided with some or a lot of support, the most common form of support requested was more frequent communication from the scheme in the years leading up to retirement, selected by 31% of the members. This was also the most common form (43%) of support requested by the members who felt they were not offered any support.
Finally, on the theme of communications, there was also evidence of supply (from schemes) and demand (from members) for one-to-one guidance sessions and retirement seminars.
Our research illustrates the range of approaches taken by schemes to help support members at retirement. Alongside our experience with clients, it also underlines the important role that engagement and communication plays in helping members make better decisions. Well-timed and well-targeted communications can make a big difference to how well members engage with additional options and support, which is the topic of the next part in this series.
Author
Liam Mayne
Partner & Corporate Actuary
More in our DB pension member options research series:
Part one: Options and choice
Part two: Support at retirement
Part three: Member engagement and communication
Part four: Terms
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