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Aon Hewitt welcomes pensions strategy review but warns that government may have to act fast if DB reforms are to be effective
NYSE: AON

LONDON, 26 November 2012 – Aon Hewitt, the human resource solutions business of Aon plc (NYSE: AON), has said that it welcomes the ideas outlined in the Department for Work & Pensions'  'Reinvigorating Workplace Pensions', but it believes the government will need to move swiftly for reforms to be effective.

Kevin Wesbroom, partner at Aon Hewitt said:
"We genuinely welcome this review – it brings the type of broad thinking that the industry needs. The review will give employers a broader spectrum of options to consider in providing workplace pensions that are both valued by the workforce and which are not prohibitively expensive. That also comes with the greater aim of trying to restore trust with employees."

James Patten, benefit design specialist at Aon Hewitt, said:
"The ideas raised in the DWP paper to unshackle DB pension provision from expensive legislative constraints, like compulsory pension increases, would give employers more options to retain some form of DB provision rather than automatically closing to accrual when faced with untenable costs. However, if the reforms are to be effective in the private sector, the government will need to fast-track these particular elements to the proposals in order to avoid closing the stable door after the horse has bolted.

"Our own 2011 pension benefit design survey, of over 300 clients based predominantly in the private sector, showed that over 40% of respondents had either closed their scheme to future DB accrual or were in the processing of doing so - and this number will continue to rise."

James Patten continued:
"Most employers recognise that DC pension provision, as it currently stands, is likely to create HR issues in the long-term if employees can neither afford nor be forced to retire. However, without government impetus, it is difficult for employers to find the motivation to deal with the issue - especially when many of their current workforce will have moved on in the next 10-20 years. The DWP's review rightly considers how to improve DC pension provision and much of the effort here needs to be around winning over trust from individuals and improving engagement in retirement saving. Clearer communication around likely outcomes and greater financial education will be key. More flexibility over how retirement savings can be used is also going to be helpful."

Kevin Wesbroom added:
"It is also pleasing to see that Collective DC arrangements remain an option within the DWP's paper, although the DWP rightly points out the need to learn from the experiences of the Dutch system. Collective DC arrangements overcome many of the difficulties in communicating DC arrangements to employees and the lack of predictability that creates mistrust in traditional DC arrangements.

"It's important that the Government uses this review as an opportunity to deliver DC arrangements in a better way, and we would certainly encourage them to consult with the industry on all aspects of the proposals."

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 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 http://www.aon.com/manchesterunited/ to learn about Aon's global partnership and shirt sponsorship with Manchester United.

 

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