An industry trend – low increases versus benefit cuts
Because most schemes are trying to compete with one another benefit for benefit, as opposed to using a most benefits for most members approach, they are faced with a conundrum when it comes to increases. One of the interventions that they use to attempt to offset exceptionally high increases is by making marked benefit cuts.
As you can see in the below diagram, some of the largest schemes in the market have had to resort to substantial benefit cuts in order to remain competitive, an intervention which is not sustainable and will see them need to implement higher increases in the long term. The diagram below shows the true value of their increases taking into account the amount of benefits cut s they implemented.
This whittling away at member benefits significantly impacts on the benefit richness and appeal of these schemes’ benefit options and could see members left out in the cold if they don’t take careful note of the benefit reductions on an annual basis. The role of the broker in these instances can’t be emphasised enough as they play an integral part in ensuring their client is aware of benefit reductions and able to make an informed choice when making their annual benefit selection.