Skip to main content
Opens in a new tab External site
UK trustees rank pension scheme investment as their greatest challenge
Against volatile market conditions, new research shows trustees are actively considering alternatives to enhance returns while reducing their correlation to equity markets
London
NYSE: AOC

LONDON, 31 March 2008 - Implementing the right investment strategy for the future is the primary concern facing pension trustees, according to new research released today by Aon Consulting, a leading pension, benefits and HR consulting firm.

 

Aon Consulting surveyed 250 trustees of Defined Benefit (DB) schemes, asking them a variety of questions about the decision-making challenges they face and what consideration has been given to investment options.

 

When asked to rank the most important or challenging issues facing their scheme in the future, over half (51 per cent) of trustees stated investment as the most important challenge. This reflects an increasingly diverse and complex investment climate and the inevitable uncertainty about future returns. Negotiating contributions from employers was seen as the second most important issue (41 per cent).

 

The survey also found that trustees are increasingly looking at alternative investments. Over a quarter (27 per cent) said they thought their investment portfolio will have diversified significantly away from traditional asset classes into alternative assets in the next five years.

 

Pension funds are under pressure to de-risk portfolios by investing a greater proportion of assets in the bond market and the results show that trustees are actively looking at alternatives to enhance overall returns, whilst reducing their correlation to equity markets.

 

In recent months pension schemes have suffered from volatile markets due to over exposure to equities. This has been extremely problematic for those with short term company reporting and those schemes looking to settle liabilities in the near future. However, some trustees are taking steps to remove exposure to such risk. 50 per cent said that they have taken action to remove risk from equity markets, whilst about a third has done the same in relation to risks from interest rates (31 per cent) and inflation (39 per cent).

 

Commenting on the survey results, Milan Makhecha, consultant and actuary, at Aon Consulting, said: “The survey shows that getting the right investment strategy in place is the most critical issues facing trustees.

 

“This aspect of trustee’s role is especially challenging in a rapidly diversifying investment market. Pension funds are under pressure to de-risk portfolios by investing a greater proportion of assets in the bond and alternative investment market.  At the same time trustees are actively looking at other strategies to enhance returns while reducing their correlation to equity markets.

 

“We think that this will be reflected in greater enthusiasm for alternative assets such as private equity, hedge funds and others over the coming years. As trustees seek strong returns, the trend will accelerate if alternative asset managers continue to develop their businesses to reflect governance and other requirements of pension funds and institutional investors.”

 

Ends

For more information contact:

Leo Wood

0207 269 7 137

leo.wood@fd.com

 

 

About Aon Consulting

Aon Consulting is a leading human capital consultancy, helping organisations of every size to attract and keep the employees they need. We advise on all aspects of employment, including health-related insurance and risk; employee compensation and pensions; human resource strategy planning; job design and change management; and staff assessment and legal issues. Aon Consulting is a division of Aon, one of the UK’s largest insurance brokers and providers of risk management services and a major force in reinsurance and the UK human capital consulting market.  Aon Consulting Limited is authorised and regulated by the Financial Services Authority.

 

About Aon

Aon Corporation (NYSE:AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. Through its 43,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was ranked by A.M. Best as the number one global insurance brokerage in 2007 based on brokerage revenues, and voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 by the readers of Business Insurance. For more information on Aon, log onto www.aon.com.

 

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, our ability to successfully close the sales of our Combined Insurance and Sterling Life Insurance businesses, the impact of current, pending and future regulatory and legislative actions that affect our ability to market and sell, and be reimbursed at current levels for, our Sterling subsidiary's Medicare Advantage health plans, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of investigations brought by U.S. state attorneys general, U.S. state insurance regulators, U.S. federal prosecutors, U.S. federal regulators, and regulatory authorities in the U.K. and other countries, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, ERISA class actions, the impact of the analysis of practices relating to stock options, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates.  Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results, is contained in the Company's filings with the Securities and Exchange Commission.

 

Media Resources

Access international media contacts, the full library of Aon media releases, and a media kit with fact sheet and executive bios, via links below.

Media Contacts
Media Releases
Media Kit
Featured Updates