LONDON, 01 December 2011 – Aon Hewitt, the global human resource consulting and outsourcing business of Aon Corporation (NYSE:AON), has today said that turmoil in bond markets has led to the highest value ever being placed on pension scheme liabilities.  The collective final salary pensions accounting deficit of the UK's FTSE 350 companies, as measured by the Aon Hewitt 350, increased by 13.2%, up from £53 billion to £60 billion.  However the collective buyout deficit increased by more, from £400 billion to £435 billion.
 
Kevin Wesbroom, managing principal at Aon Hewitt, said:
"The cost of pension scheme liabilities has rocketed by 30% since the start of the year.  This is the largest increase in liabilities for almost 15 years and leaves the cost of pensions at the highest level we have ever seen.  The reason for this is that yields are now the lowest we have experienced in recent history, in fact yields on index-linked bonds, net of inflation, are now negative. That means that these investments are guaranteed to fail to keep pace with index-linked liabilities."

Paul McGlone, principal and actuary at Aon Hewitt said:
"While the cost of pensions has increased dramatically, the value of liabilities in company accounts has not shown the same kind of increase, as these liabilities are calculated by reference to the corporate bond market.  For each £100 million of liabilities at the start of 2011, company accounts will now be showing around £110 million, while funding valuations will be showing £130 million of liabilities.  That could prompt some very difficult discussions between plan sponsors and trustees.

"In addition, the collapse in yields also means that buyout and buy-in premiums have soared.  While schemes in specific circumstances are still using the buyout/buy-in market, for many schemes the increases in liabilities has reinforced the fact that they are many years away from being able to secure their liabilities.  But there are other approaches and for those schemes we expect in the coming year to see a greater emphasis on unfunded solutions such as longevity swaps - similar to the one recently announced by Rolls-Royce - or liability management exercises."
 
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Notes to Editors

About the Aon Hewitt 350
The Aon Hewitt 350 index tracks the aggregate final salary pension scheme deficit for the FTSE350 companies. It is based on the information provided by FTSE350 companies in their semi-annual company accounts and updated for current market conditions on a daily basis.

About Aon Hewitt
Aon Hewitt is the global leader in human resource consulting and outsourcing 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 Corporation (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 http://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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