LONDON, 21 November 2012 – Aon Hewitt, the human resource solutions business of Aon plc (NYSE: AON), has released the results of its latest survey on funding triggers which reveals that the majority of schemes are not changing their strategy even though their funding remains below – and in a number of instances is actually moving away from -  the level set for their funding triggers.

Paul McGlone, partner at Aon Hewitt said:

“To remain realistic, flight plans and triggers need to be reassessed and refined from time to time, especially when conditions change substantially. However, despite the ongoing low yield environment, there is undoubtedly an element of ‘Keep Calm and Carry On’ in the industry. Trustees are anticipating that if no action is taken, then in time, yields will rise and the situation will become more manageable.”

The survey asked around 80 schemes, with funding level triggers in place, what actions they have taken in response to falling funding positions.  The results show that over two-thirds of schemes have opted not to change their strategy, hoping to ride out the low yield environment. Around one in five schemes have re-risked their asset strategies, while around one in six have reviewed their trigger points.

Paul McGlone continued:

“The biggest thing that schemes with triggers are doing is actively not buying matching assets, as their triggers are telling them that they are unaffordable at current prices. Many trustees and employers have clearly taken the view that taking no action is a rational response and that their triggers will tell them when matching assets are back to a level that they can reasonably afford. However, at the same time, there is a danger that prices will take a long time to come back down, so schemes could find themselves in a position of inactivity for some time.”

As well as deciding not to buy matching assets, the survey showed that schemes are considering whether to take the further step of selling matching assets to buy additional return-seeking assets in order to re-risk. Almost 50% of all schemes with de-risking triggers recognised the merits of re-risking and would be prepared to take that step if required.  Almost one in five (19%), have taken that step and re-risked in the past 12 months.

The survey also showed that around one in six schemes have treated current market conditions as an opportunity to reassess the future, by re-setting their flight plan and triggers.  In doing so, they are considering whether their previous targets continue to be realistic with a view to revising timescales, targets and/or contributions.

Paul McGlone concluded:

“We expect to see a continued trend towards flight plans and triggers being adopted. For schemes that already have them in place we are already seeing an increased interest in how they can be managed more dynamically to ensure that the flight plan remains viable. In addition, there is a growing interest in how triggers can be used in new areas such as bulk annuities and liability management.”

Media Contact: 

Colin Mayes                                             Giles Abbott
 Aon Hewitt                                                Capital MSL
 01372 733689                                         020 7307 5340
colin.mayes@aonhewitt.com                giles.abbott@capitalmsl.com

Notes to Editors
About the survey
The Aon Hewitt survey polled around 80 schemes with assets from under £10m to over £10bn and with funding triggers in place. They were asked how trustees were responding to the impact that falling yields and funding levels are having on the schemes’ position in relation to their triggers.

Funding level triggers are typically designed to reduce a scheme’s allocation to return-seeking assets as the funding position improves.  An example may be a trigger to reduce the growth allocation from 70% to 60% when the funding position reaches 80%.  Aon Hewitt research indicates that close to 20% of pension schemes now implement triggers such as these.

About Aon Hewitt
Aon Hewitt is the global leader in human resource solutions.  The company partners with organisations to solve their most complex benefits, talent and related financial challenges, and improve business performance.  Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies.  With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

About Aon
Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 61,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.