1. Who gets the freedoms?
Anyone with a pot of money in a defined contribution (DC)/ money purchase pension scheme.
If you provide your employees with a trust based DC scheme you need to decide, with the trustees, the extent to which you want to allow access to the new freedoms. You might allow members to only take their pot in one go, or you might allow them to take their pot in chunks as they choose. The more flexibility you offer the greater the operational costs and risks.
You do not have to allow access to the freedoms. You can decide that the members’ only option is to transfer to another pension scheme.
2. What are the freedoms?
The members can take their entire pot of money as cash from a minimum age. The minimum age is currently 55, although this will increase to 57 in 2017.
They can take their cash in one go or, if you permit, in chunks. Alternatively they still have the right to use their pot to buy a lifetime pension with an insurance company.
3. What happens if they take a transfer but stay employed?
They will no longer be a member of your scheme if they take a transfer.
You will need to decide whether to allow them re-entry for future contributions. If you decide they should not be allowed to re-enter you will need to consider whether they should be Auto Enrolled.
4. Impact on “exit strategy”
Pension schemes have often been used by employers to help uneconomic employees to leave the business as they get older.
The new freedoms allow the members to access and spend their pension pot at a time and in a way of their choosing.
You should review your “exit strategy” for older workers to ensure you can still manage them efficiently as they become less productive.
5. Trustee budget
If you decide to allow access to the new freedoms, you should consider the budget you allocate for the operation of the trustees. The trustees operation and risks will expand significantly.