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Aon Hewitt expects employers to work closely with trustees on end of contracting-out

London, 20 May 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), has said that once contracting-out ceases in April 2016 many employers may not use the recently announced draft regulations to offset the additional National Insurance (NI) cost.

The draft regulations enable employers with contracted-out defined benefit (DB) schemes to plan how they can adjust scheme benefits to offset the burden of the additional NI they will face– typically worth around 2.5% p.a. of DB payroll. Employers will be able to impose changes that offset this cost burden without trustee agreement - though they will still be subject to member consultation.

James Patten, head of Pension Benefit Design at Aon Hewitt, said:

"While the draft regulations provide welcome clarity, in practice we expect many employers not to use them. We learnt from our summer 2013 survey that many employers are looking to go further than simply offsetting the additional NI cost.  More employers are considering closing to DB future accruals than any other option and trustee agreement will commonly be needed in these cases. Employers simply looking to offset the additional NI cost may prefer to obtain the trustees' agreement and work closely with them rather than bypassing them using the overriding regulations."

James Patten continued:

"Employers will want an efficient path through the changes. At Aon Hewitt we are developing a suite of off-the-shelf materials to meet this demand, including written communications to members.

"At present, one area that remains unclear is whether the outcome to the Defined Ambition consultation from the Department for Work & Pensions (DWP) will present new middle ground solutions to employers. These Defined Ambition proposals  ̶ such as Collective DC and the removal of statutory pension increases ̶  could be particularly attractive to some employers looking to reform their pension arrangements following the cessation to contracting-out."

― Ends ―

Notes to editors

A summary of Aon Hewitt’s summer 2013 survey on the cessation to contracting-out can be obtained by emailing James Patten (james.patten@aonhewitt.com).

About Aon Hewitt 

Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

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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 66,000 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.

Media Contacts:     Colin Mayes                                            Giles Abbott

                               Aon Hewitt                                             Capital MSL

                               01372 733689                                         020 3219 8805

                   colin.mayes@aonhewitt.com                   giles.abbott@capitalmsl.com

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