LONDON, 19 May 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), believes that by underwriting bulk annuity deals with medical data of members, UK schemes could save up to £50m on transaction costs throughout 2014.

Medically underwritten annuities have been available for individuals for a number of years, allowing pensioners with serious health impairments access to better annuity rates based on their reduced life expectancy. Around 60% of individuals have some form of impairment that could result in a lower cost of an annuity, but these potential savings are something schemes have traditionally been unable to unlock in the bulk annuity market.

2013 saw this change with around £100m of medically underwritten bulk annuity transactions completed in the UK. Nearly £100m of deals have already been recorded in 2014 and Aon Hewitt sees potential for at least £500m of activity in the full year. Available data shows that pension schemes can generate savings of up to 10% on traditional bulk annuity costs by using medical data to support the underwriting process used by insurers. This equates to potential savings of £50m for schemes for the full year.

John Baines, principal consultant in Aon Hewitt’s Risk Settlement team said:

“In 2013, UK pension schemes completed a record £7.8bn of bulk annuity transactions, an increase of 65% on the £4.7bn worth of deals in 2012. The market continues to grow at pace and schemes are understandably looking for more affordable ways to de-risk as they seek greater pensions stability. Medically underwritten bulk annuities are an attractive and viable option that both small schemes and larger schemes with a concentration of risk are now exploring.”

Trustees looking to complete a medically underwritten bulk annuity transaction currently have two methods of doing so. First, they can work directly with an insurance provider to collect the required medical data of scheme members, or they can employ a third party to do so – but both options have their potential problems. The challenge for trustees is to access this market in a way that involves multiple insurers, thereby maintaining competitive pricing, and which avoids unnecessary delays. Delays can arise when a third party has to get to know a scheme’s structure, membership, challenges, and goals from scratch. 

Aon Hewitt launches AHEAD

Launched today, the Aon Hewitt Enhanced Annuity Data (AHEAD) platform provides trustees with a new process for collecting member data which is faster and more efficient than available alternatives. Importantly, all data collected can be effectively used by all of the insurers currently providing medically underwritten bulk annuities. This significantly reduces the time, complexity and cost of data collection, providing trustees with a competitive edge in comparing providers' prices.

John Baines continued:

“Combining Aon Hewitt’s expertise in advising trustees on de-risking processes with the AHEAD platform will  reduce the time spent on medically underwritten bulk annuity projects. By providing schemes with a one-stop shop, they will also benefit from our holistic understanding of their needs. With this improved efficiency, we believe that Aon Hewitt is in a market leading position for helping schemes unlock the best possible savings in medically underwritten bulk annuities."

-Ends –

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, Aonunites 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 Contact:        Colin Mayes                                           Giles Abbott

                                Aon Hewitt                                              Capital MSL

                                01372 733689                                         020 3219 8805

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