Editorial: Care for a slice?

BT would say yes, pointing to the 30,000 scheme members that have sought independent advice over its Pie offer. The company stresses the flexibility it provides in retirement.

I cast my mind back to September 2011, when David Norgrove, former chair of the Pensions Regulator, took aim at Pies – alongside enhanced transfer value exercises – in a video interview still available at pensions-expert.com.

"I remain very concerned about them," he said at the time. "It seems to me... that this is another pensions mis-selling train crash that we can see happening in front of our eyes." It was a small number of people for which taking up these offers make sense, he added.

Illustration by Ben Jennings

Well, since then we've had the code of practice on incentive exercises – check out incentiveexercises.org.uk if you are interested – formalising some of the better practice and correcting some of the worst.

Our BT story, like our case study last July on how the Royal British Legion cut £1m off its deficit with a Pie offer, demonstrates how companies are stressing the protections they have built into these exercises for potentially vulnerable scheme members.

Schemes have been in desperate need of some sort of liability-reducing measure, given recent experiences of low yield and equity volatility asset markets.

At the same time, the costs of these exercises should be compared with how much they are actually reducing deficits, and whether they will complicate any future bulk derisking transaction – providers will scrutinise closely how they have affected liability profiles.

We will have to wait to see how much funding benefit schemes ultimately secure through these offers, and whether there is any backlash from members. The industry code has decelerated the train, but if the market is indeed growing again there will be plenty more to keep an eye on. 

Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.