The burden of defined benefit (DB) pensions has never seemed more acute than it does right now. However, while low interest rates persist, the cost of transferring DB liabilities to an insurer keeps this option out of reach for many trustees and employers.
Meanwhile, members of DB pension schemes who are looking to maximise their tax-free cash and immediate income on retirement are finding that DB’s complexity and inflexibility does not suit their needs. For example, spouses’ pensions are usually provided – even for single members. Additionally, a typical scheme may have up to five different tranches of pension that have different levels of post-retirement increase. These elements make it very hard for members to understand how their pension will increase each year after retirement.