Many UK defined benefit pension schemes may be missing an opportunity to reduce their pension risk and liabilities, Aon Hewitt has reported.

A recent poll of 200 Aon Hewitt UK clients with DB schemes found that under 10 per cent currently provide independent financial advice for scheme members at retirement. This has led to many members being uninformed of their options, such as transferring assets into a defined contribution scheme and therefore having the opportunity to take advantage of pension freedoms.

Aon Hewitt partner and head of member options Ben Roe, said: “Providing members with a complete picture of their financial situation and options at retirement should be a key priority for all UK pension schemes – it’s in the best interests of both the member and the scheme. We have seen a significant variability in transfer activity among clients depending on the level of information members receive and the additional support they are provided. In general transfer activity is low, but we have seen around 30-40 per cent of transfers happening when members are automatically provided with transfer value quotes and access to independent advice at retirement.

“It’s important that schemes provide access for members to good quality, independent financial advice. There will be circumstances when transferring out will not be in the best interests of the member.”

Aon Hewitt noted that when a member decided to transfer from a DB to a DC scheme, the scheme itself could benefit from a reduction in its overall risk and assists the scheme’s route to pension stability.

Roe added: “It is important to balance the needs and objectives of both trustees and scheme sponsors by delivering better member outcomes in a cost effective and efficient way. Enabling members to make the right decision for their circumstances could lead to more liabilities being transferred out of the scheme, ultimately helping schemes move closer to pension stability by reducing pension risk.”

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