Using bridging income options to help your members and reduce risk

At a glance


Due to recent and ongoing increases in the State Pension Age, most members draw their scheme benefits before they can access their state pension


As a result, members can receive significantly less income in the early years of their retirement, often when they want and need it the most


To bridge the gap, members may be able to re-shape their pension benefits to provide more income in those early years


This re-shaping can be done within the pension scheme, often known as a ‘Bridging Pension Option’ (BPO)


A new alternative option, ‘Bridging Income Pots’ (BIPs), allows members to do this flexibly outside the scheme instead. Members transfer a portion of their benefits into a flexible pot to ‘draw down’ in the early years of retirement


For a typical member retiring at age 60, BIPs could result in the member receiving around 10% more income over their lifetime, compared to traditional BPOs


The need for bridging income


Advantages of bridging income


Actions employers can take

1. Review the current options available to see if a bridging income option exists.

2. Assess whether your members and your strategy could benefit from BIPs.

3. Engage with your trustees to explore implementing BIPs.

4. Review your communications to ensure members are receiving all the information they need, in the best way possible, to make informed retirement decisions.


The two options for providing bridging income

Comparing the two options

 

For further information, please get in touch with Paul Hamilton or Jim Heal or speak to your usual XPS Pensions contact.