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Aon Hewitt and Eversheds launch the Pensions Stability Buffer
Solution developed to reduce the risk of trapped surplus
NYSE:AON

LONDON, 1 July 2015 - Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has announced that it has developed the Pensions Stability Buffer in collaboration with leading international law firm Eversheds. The service provides a complete solution for defined benefit pension schemes and sponsors wanting to establish an efficient and cost effective funding vehicle to sit alongside their pension scheme.

The Pensions Stability Buffer can be used to bridge the gap in views between a sponsor that does not wish to put more money into its defined benefit pension scheme and trustees who are required to be prudent. It is particularly useful if the sponsor is concerned about the risk of trapped surplus. This can be both very difficult and highly costly for sponsors to recover, so many sponsors are looking at establishing an alternative funding vehicle outside the scheme which can act as a funding buffer. However, a buffer also provides security for the trustees and can be structured to provide legal protections for the scheme in the event of the sponsor’s insolvency.

Lynda Whitney, partner at Aon Hewitt, said
“Many sponsors feel that there is an asymmetry to pension scheme funding. The Pensions Stability Buffer looks to redress this imbalance so that funds are available for the pension scheme if they are ultimately needed, whereas it is much easier for funds to be returned to the sponsor if they are not required. This means sponsors are likely to be more willing to pay contributions to the Pensions Stability Buffer, increasing the overall security for members' benefits.

"The work already done by Eversheds and Aon Hewitt means that the Pensions Stability Buffer is cost effective and efficient compared to a traditional escrow account."

Steven Hull, partner at Eversheds, said:
“There is increasing concern about overfunding among sponsors of some defined benefit pension schemes and that surplus assets may become trapped within their schemes. The Pensions Stability Buffer is specifically designed to help reduce this risk. It provides security to the pension scheme trustees and can encourage sponsors to fund their schemes more fully and more quickly by giving them reassurance that they can recover excess contributions should a surplus arise in the future. It’s an ideal safety valve.

“The Pensions Stability Buffer draws on our and Aon’s combined experience of advising on the legal, actuarial and investment elements of alternative funding arrangements over many years. We have prepared template legal documentation which means that the buffer can be established quickly and cost effectively by trustees and scheme sponsors who also benefit from not having to re-invent the wheel. The arrangement is also flexible, allowing sponsors and trustees to choose which elements they need and tailor it to suit the particular circumstances of their scheme.”

Key features of the service include:
-    Assets are held securely within a charged custody account
-    Unlike an escrow account, the use of a custodian permits a wide range of investment opportunities
-    Free initial meeting to assess whether the Pensions Stability Buffer is appropriate
-    Template legal documentation
-    Advice from Aon Hewitt on both possible triggers and how to invest the assets (including access to Aon Hewitt's delegated consulting service)
-    Pre-agreed legal agreement with the custodian
-    Competitive fixed fees for all key elements


ENDS

 

Notes to Editors
About the Pension Stability Buffer
http://www.aon.com/unitedkingdom/attachments/aon_hewitt/ps/Aon_Hewitt_Pension_Stability_Buffer_Brochure_Jun15.pdf

About Aon
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and
reinsurance brokerage, and human resources solutions and outsourcing services. Through its more
than 69,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via
innovative risk and people solutions. For further information on our capabilities and to learn how we
empower results for clients, please visit: http://aon.mediaroom.com/

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About Eversheds LLP
Eversheds LLP and its worldwide offices have over 4,000 people who provide services to the private and public sector business and finance community. Access to all these services is provided through 55 international offices in 29 countries. Eversheds combines local market knowledge and access with the specialisms, resources and international capability of one of the world's largest law firms


Media Contact
For further information please contact:
Colin Mayes                                   Marina Jane Sanchez
Aon Hewitt                                      CNC
01372 733689                                  020 3219 8811
colin.mayes@aonhewitt.com            marina.jane-sanchez@cnc-communications.com

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