first_imgThe tool will use anonymised data from completed member options exercises and pension schemes’ own data from more than 20,000 member transactions, which, through a machine learning algorithm, will determine the probability of a member accepting a tailored offer.This new data-driven approach will help DB schemes and sponsors to better manage risk through planning member options projects that have optimum member offer structures, it added.The tool has already identified several factors impacting a member’s decision on whether to transfer out of their DB scheme. Age is a key factor, with those members older than 55 on average 18-20% more likely to accept an offer than younger members.Mercer said that place of residence also plays a determining part, with overseas members 10% more likely to accept a transfer value than those based in the UK.“This information will help schemes create offers that are tailored to the scheme’s specific characteristics, ensuring that members are presented with a range of pension options to consider,” Ward said.He added: “It is important that members also seek financial advice to ensure they are able to make an informed choice that will meet their retirement needs.”In a 2020 outlook report Mercer says that technology and artificial intelligence are increasingly changing investment processes, alpha generation, and product design and distribution. Investment consultancy Mercer has launched an artificial intelligence (AI) powered tool to assist defined benefits (DB) pension schemes predict the outcome of a member options exercise.Andrew Ward, partner and head of risk transfer at Mercer, said: “Since the introduction of Pensions Freedom and Choice over four years ago, transfer options have played an increasingly important role in pension schemes’ risk management.”He said that with gilt yields at historic lows, members are likely to be “taking higher transfer values against the backdrop of uncertainty caused by Brexit”.He noted, however, that “while market conditions can influence take-up, the decision to transfer is more likely to be driven by personal circumstances.”last_img

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