UK pension professionals face an "exceptionally" busy period as they return from the summer holidays to deal with the consequences of the 2014 Budget changes, Aon Hewitt has said.

According to the firm's recent survey with responses from more than 300 pension professionals, over two-thirds admitted they were not fully prepared to deal with the consequences of the changes, but were confident they could get there in time for April 2015.

When asked if they could make the process and system changes to be able to offer their members the best options after Pension Freedom Day next year, one in five respondents said they were not confident and would need significant extra resource, in terms of time, money or external support.

Kevin Wesbroom, Aon Hewitt senior partner, said: "The Budget changes are really quite fundamental for all types of schemes – defined benefit (DB) and defined contribution (DC) alike.

"Sponsors and trustees need to stand back from their schemes and ask some fundamental questions about how they see their relationship with members. They then need to align their administrative processes, member communication and education systems to support their decisions."

He said that the majority of DB schemes that were questioned think that a "sizeable minority" of their members would take advantage of the Budget flexibilities.

"So, as well as reviewing the various actuarial factors involved – cash equivalent transfers, commutation rates etc – schemes will need a coherent plan for how and when they present the new options to their members," Wesbroom said.

Regarding DC schemes, only 7% indicated that they would offer an in-house drawdown option, while 57% of the respondents favoured the option where they could identify external providers for decumulation.

Jan Burke, Aon Hewitt head of DC, said: "The preferred provider route seems to make a lot of sense but there is very little time to decide on the products to be offered and to get processes and communication in line with that choice."
The respondents were split 50:50 on the issue of whether or not the employer should fund financial advice, but the 50% who said they would did not intend to offer this to all members, with 26% saying this would only be provided for certain segments.
Burke said: "Retirement packs will soon start going out for members retiring immediately after Pensions Freedom Day.

"The administrative processes and communication packs will all take time – but work can't be started on these until companies and trustees have answered the Big Picture questions on how they see their role in helping members take best advantage of the flexibilities the Chancellor has given them."

First published 27.08.2014

monique_simpson@wilmington.co.uk