LONDON, 28 May 2008 - Over a quarter (27%) of trustees with defined benefit (DB) pension schemes currently in deficit believe that their funds will still be in deficit in ten years' time, according to new research released by Aon Consulting, a leading pension, benefits and HR consulting firm. The findings are drawn from Aon's 2008 Trustee Report, Hard Miles Rewarded, Defined Benefit Pensions: The Trustee View, which is released today.

(To access the report, visit: http://aon.mediaroom.com/index.php?s=20.)

These findings would fall foul of the expectations laid out in the Regulator's comments supporting the scheme funding legislation laid out in the Pensions Act 2004. Within this he set out his intention to focus on schemes with plans to clear deficits over a period of longer than 10 years. Although the Regulator said he will seek to be flexible, these schemes should expect to attract further scrutiny.

Commenting on the survey findings, Paul McGlone, principal and actuary at Aon Consulting, said: "It is concerning that over a quarter of trustees with schemes currently in deficit consider it likely that the deficit will still be there in ten years. This goes against the expectations of the Regulator and, more importantly, implies that over a quarter of companies with final salary schemes cannot afford to make good the deficits over the ten years. While there may be good reasons for not meeting these expectations - and the Regulator has said that he will take these into account - clearly he will want to take a closer look at these pension schemes.

"On the plus side, there are still many avenues left for trustees to explore in terms of finding ways to address their deficits. Many have yet to look at the implementation of contingent funding arrangements, for example, which could have the added advantage of reducing Pension Protection Fund levies."

In contrast, despite market volatility, which has seen &millions wiped from pension funds, the Survey finds that the majority of trustees are in fact bullish about the long-term prospects for their schemes, with over half (56 per cent) of those currently in deficit believing that their schemes will be in surplus in a decade's time. Of these, nearly two thirds (61 per cent) attributed the improvement to contributions to be made by the sponsoring employer. Just over a quarter (27 per cent) thought that it would come through improved investment performance.

Paul McGlone added: "The bullish attitude of a large proportion of the surveyed trustees is encouraging and reflects the belief that schemes are, in the main, adequately funded by the sponsoring employer. These trustees seem to have embraced the recent scheme funding legislation, which promotes open communication with the employer over the funding of the scheme. This could be the reason why most believe that their deficits will be eradicated by additional employer contributions.

"However, challenges over communication may still remain. We are currently in a period of increased activity in the buyout market but our Trustee Survey highlights that employers and trustees may have differing expectations on the future of their DB schemes.  It will be interesting to see whether continued news of high profile buyouts brings trustees and employers closer together on this issue."

Aon surveyed 250 trustees of DB schemes, asking them a variety of questions about their attitudes and responsibilities. This is Aon's first survey of UK pension fund lay trustees and is designed to complement Aon's existing annual survey of employers with DB schemes pension schemes.

Commenting on the Trustee Survey's overall findings, Paul McGlone said: "The Trustee Survey illustrates that trustees are generally upbeat about the future for defined benefit schemes. Its findings reveal some interesting insights into their attitudes towards investment strategy and settlement expectations in particular.

"Four years on from the passing of the 2004 Pensions Act, Aon's Trustee Survey shows that while trustees of defined benefit schemes are being robust in terms of stepping up to increased responsibilities and governance requirements, there are still substantial communication gaps between trustee boards, their sponsoring companies and members."

Ends

Notes to Editors
About the survey

This is Aon's first survey of UK pension fund lay trustees, and is designed to complement the annual survey of employers with defined benefit (DB) pension schemes that it has been conducting since 2005.

In early 2008, Aon interviewed 234 lay trustees serving pension funds across a wide range of commercial and not-for-profit organisations. The funds ranged in size from under &30 million to over &500 million. 60% of respondents were nominated by the sponsoring company, the remainder nominated by the scheme members. Aon did not seek opinion from professional trustees. Over 80 per cent of respondents were in full time employment. Blue- and white-collar roles were included amongst the respondents, although almost two thirds said their "day-jobs" were in finance, human resources or general management. Three quarters of the group had been in a pension fund trustee role for two years or more, and nearly half (48%) had been in the job for over five years. Whilst the primary focus of this survey is DB pensions, over one hundred of the trustees surveyed also sat on defined contribution (DC) pension fund boards.

For more information contact
Leo Wood / Susie Patterson
0207 269 7137 / 233
leo.wood@fd.com  / susie.patterson@fd.com 

About Aon
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. Aon also 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.

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