LONDON, 17 December 2009 In news sure to bring a bit of Christmas cheer, the UK’s combined defined contribution (DC) pension savings have rebounded by over £103bn (or more than 25%) since this time last year, according to Aon Consulting, the leading employee risk and benefits management firm.

The total value of DC assets stood at nearly £505 billion at the end of November, up £16 billion compared to the end of last month. Aon’s monthly DC Pension Tracker measures the total asset value of UK workers’ DC pension accounts.

It also tracks the income in retirement of individuals at different ages who contribute 10% of a £25,000 salary to a DC arrangement and have an existing fund (valued as at September 2007) of £15,000 for age 30 and £150,000 for ages 55 and above.

The Aon DC Tracker’s record of 2009 (data taken at the end of each month):
 

Richard Strachan, senior consultant at Aon Consulting commented: “It’s been another rollercoaster twelve months for UK workers. The nation has seen its combined savings fluctuate from a year-low of £344bn during March to a high of £518bn during October.

“Additionally, not only have insurance companies cut annuity rates, but ongoing fluctuations within their rates have added further confusion for the average worker trying to decide when to retire. 

“A 65 year old looking to retire can now expect to receive an annual income of approximately £8,920, which is more than 20% higher than the £7,275 they would have received in November 2008. 

“If the same pensioner had retired in February, though, they would have received an annual income of just £6,460.  Such fluctuations continue to demonstrate the uncertainty facing British workers, leading to understandable apprehension.

“With this unprecedented volatility, it is no wonder that people feel their decisions about retirement are like throwing a dart at a map. Aon’s research* shows that in the majority of companies in the UK, more than 80% of workers automatically enrol in the default fund recommended by their employer and yet only 11%** of companies have seriously looked at the makeup of their DC scheme during the recession so far.  At this point in time, sponsoring employers should be making every effort to help staff to review their existing provisions.”

Ends

Notes to Editors
About the Aon DC Pension Tracker
The Aon DC Pension Tracker (“the DC Pension Tracker”) provides a realistic gauge of how the British DC pension market is faring by examining how the wider economy is impacting on the pensions of average workers. The research tool does two things:

1.       Tracks the change in size of the British DC pension market.
2.       Calculates the expected pension income at retirement for individuals. This is based on assumptions for both future investment return and inflation as well as taking into account the actual changes in investment performance and annuity rates.

The DC Pension Tracker examines the changes in workers’ pensions month on month, depending on different age groups and assuming 100% of the pensions are invested in equities. It tracks the income in retirement of individuals at different ages who contribute 10% of their £25,000 salary to their retirement savings and have an existing fund (valued as at September 2007) of £15,000 for age 30 and £150,000 for ages 55 and above. The DC Tracker shows what this would be worth at the time the press release is issued.

*About the 2009 Aon Benefits and Trends Survey

The 2009 Aon Benefits and Trends Survey polled 650 companies across 13 sectors on their DC pensions, health and risk benefits and flexible benefits

**An Aon Consulting survey of 70 pension scheme sponsors and trustees carried out in November 2009

For press enquiries please contact:
Leo Wood
leo.wood@fd.com
0207 269 7137

David Skapinker
020 7505 7478
David.skapinker@aon.co.uk
http://aon.mediaroom.com

About Aon Consulting
Aon Consulting Worldwide is among the top global human capital consulting firms, with 2008 revenues of $1.358 billion and more than 6,300 professionals in 117 offices worldwide. Aon Consulting works with organisations to improve business performance and shape the workplace of the future through employee benefits, talent management and rewards strategies and solutions. Aon Consulting was named the best employee benefit consulting firm by the readers of Business Insurance magazine in 2006, 2007 and 2008.  For more information on Aon, please visit www.aon.mediaroom.com.

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Aon Consulting Limited is authorised and regulated by the Financial Services Authority