Rising interest in coupling GMP equalisation with PIE exercises - Aon

Pension schemes’ focus on overcoming and managing GMP equalisation issues is leading to many coupling GMP conversion with Pension Increase Exchange (PIE) exercises, according to Aon.

The firm said that almost six out of ten (59 per cent) pension professionals polled in a recent Aon webinar said they considered combining GMP conversion and PIE to be a positive solution.

Among those holding this positive impression, around two-thirds saw it as a good way to unlock further savings from PIE and around a third saw combining the exercises as a way to overcome some of the drawbacks of GMP conversion.

Aon head of member options, Kelly Hurren, said: “If a scheme is already thinking of running a PIE exercise, GMP conversion allows it to maximise the benefits and effectively kill two birds with one stone. If a scheme is considering conversion, then going through PIE at the same time is an opportunity to deliver conversion while addressing many of the drawbacks head on.”

She added that “key considerations” for schemes included keeping communication simple and focused on members’ benefit options, and ensuring members can receive advice on whether PIE is right for them.

“Typically, around 60 per cent of members take advice in PIE exercises – and we would expect this to be even higher when combined with conversion. This can also be an opportunity for members to get guidance or explanation from the IFA around the impact of the GMP conversion on their benefits,” said Hurren.

Aon partner and head of GMP equalisation, Tom Yorath, said: “For some schemes, a dual-records approach is clearly the right answer – our previous polling has suggested around half of schemes will go for this approach. That said, many schemes who were on the fence are increasingly finding that combining GMP conversion and PIE brings significant benefits and removes implementation barriers.”

Yorath added that this combination could lead to increased member engagement and take-up than a standard PIE exercise “as members are not anchored to a current pension and can instead make fully informed decisions about their retirement benefits” and noted that doing both projects at the same time “costs less than running each project separately”.

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