Skip to main content
Opens in a new tab External site
Non-financial benefits are the key to outsourcing pensions admin - Survey
New research from Aon finds that the desire to focus on core business is the main driver for companies to outsource pensions administration
London
NYSE: AOC

LONDON, 24 July 2008 - New research from Aon Consulting, a leading pension, benefits and HR consulting firm, has found that the single most important driver for outsourcing pension scheme administration was the need for businesses to focus on their core competencies rather than their pension funds, with a fifth (19 per cent) citing this as their primary motivation. The finding goes against the common assertion that controlling costs is the primary motivation behind the decision to outsource.

Over two thirds of employers have outsourced their pension administration for defined benefit (DB) schemes, according to new research from Aon Consulting. Aon surveyed more than 100 senior executives responsible for DB scheme arrangements in the UK.

For those employers who offered a defined contribution (DC) scheme alongside their DB arrangements, just 15 per cent retained both DB and DC scheme administration in-house, 12 per cent retained in-house administration for DB but outsourced their DC schemes, and a small proportion (4 per cent) administered their DC schemes in-house whilst outsourcing DB.

Other reasons cited for outsourcing were the lack of in-house resources (17 per cent), the lack of appropriate expertise (17 per cent) and the need to control cost (13 per cent).

Commenting on the findings, Stuart Heatley, managing director, administration said:

"The results suggest that third-party administration continues to be an attractive path for many schemes. It is clear that financial benefits can be gained through appointing a third-party administrator (TPA). However, it is the non-financial benefits a TPA can bring that are arguably the most important. The decision to outsource shouldn’t simply be viewed as a cost cutting exercise but as a way of improving the service offered to scheme members.

"Outsourcing pensions' arrangements to a TPA allows a business to focus on its core activity by handing over the reigns to a business whose core activity is pensions administration and whose specialist focus is purely on minimising risk and maximising efficiency in service delivery.

"Also key in today's increasingly complex pensions environment is managing the headache of legislative inspired change. The peace of mind brought about from outsourcing to a specialist with technical expertise on tap, who will guide and keep its clients’ schemes up-to-date as part of a large-scale, managed process is likely to be of value to an increasing number of schemes.

"However, despite the advantages, outsourced administration isn't the favoured route for all schemes. In line with our continuing commitment to engaging with the market, we will be actively approaching in-house administration experts over the coming weeks to better understand their motives and to share best practice."

Ends

For more information contact:
Leo Wood / Josephine Corbett
0207 269 7137 / 250
leo.wood@fd.com / josephine.corbett@fd.com

David Skapinker, 020 7505 7478, david.skapinker@aon.co.uk

Notes to editors
About the Pension Scheme Administration Employer Survey The survey sample balanced in terms of scheme size. 26 per cent of those surveyed held assets in excess of £500m, 27 per cent held assets of between £100m and £500m, 27 per cent were in the £25m-£100m range and 20 per cent held assets of £25m or less. For those sponsors who also have DC arrangements, contract-based pension arrangements predominate (55 per cent). Around a further third of schemes (36 per cent) have trust-based arrangements (overwhelmingly for large schemes), with small numbers having career average (6 per cent) and hybrid schemes (3 per cent).

About Aon
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 human capital consulting market. Aon Consulting Limited is authorised and regulated by the Financial Services Authority.

Aon Corporation (NYSE:AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting. Through its 36,000 colleagues 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 named the world's best broker by Euromoney magazine's 2008 Insurance Survey. In 2008 Aon was ranked as the world's largest insurance broker based on brokerage revenues by Business Insurance. Aon also was ranked by A.M. Best as the number one insurance broker based on brokerage revenues in 2007 and 2008, and was 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 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, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, the outcome of inquiries from regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws, 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, and the cost of resolution of other contingent liabilities and loss contingencies. 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.

Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.

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