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Aon Hewitt welcomes Defined Ambition consultation but says more prioritisation is needed
NYSE:AON

LONDON, 7 November 2013 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has welcomed the Department for Work and Pensions' (DWP) public consultation document on 'Reshaping Workplace Pensions for Future Generations'. However, it believes certain proposals need prioritising while there are still more questions than answers when it comes to improving DC provision.

Kevin Wesbroom, senior partner at Aon Hewitt said:
"We welcome the consultation which we believe constructively advances the debate on UK pension provision and we relish the challenge thrown down by the Pensions Minister for innovation to deliver better member outcomes. However, the consultation does cover considerable ground and for real progress to be made, we believe clearer priorities need to be set to allow the industry to concentrate in the most effective way."

On Collective DC
Kevin Wesbroom said:
"In our view, the most important development in the consultation document is the potential introduction of Collective DC schemes. The report references Aon Hewitt research into Collective DC plans without guarantees. Our research has shown that these plans offer a unique combination of being fixed cost for employers, while at the same time delivering higher, more stable outcomes for members. Initial discussions we have had with employers show there is a genuine interest and excitement in CDC plans being an option for future pension provision in the UK."


On flexible DB scheme designs
James Patten, head of Pension Benefit Design at Aon Hewitt said:
"It is highly unlikely we will see many employers that have already closed to Defined Benefit (DB) accrual considering the reintroduction of these arrangements. However, for employers that still provide DB benefits for some of their workforce, the proposal to remove statutory pension increases will provide a helpful alternative to DB closure in response to the ending of contracting-out and low bond yields. Of course, this will rely on the new flexibility being introduced well ahead of April 2016, when contracting-out ceases.

"Some of the other DB proposals, for example the conversion of DB rights into DC funds where members leave before retirement would be complex and again may prove ineffective for relatively mature scheme memberships. Of the DB proposals, we would therefore advocate prioritising the removal of statutory pension increases so that this is introduced well ahead of April 2016, when contracting-out ceases."


On improved DC provision
Jan Burke, partner and head of DC Consulting at Aon Hewitt said:
"At this stage it seems there are still more questions than answers when it comes to improving DC income stability, particularly around the appetite from industry to provide many of the guarantees considered. For the time being, as encouraged by the Regulator, we would suggest employers and trustees focus on improving DC outcomes within the current framework by ensuring investment arrangements, scheme governance, administration and member communication are appropriate. Bear in mind that the vast majority of private sector employers sponsor DC plans."

 

Media Contact: 
Colin Mayes                                         Adam Leviton
 Aon Hewitt                                          Capital MSL
 01372 733689                                     020 3219 8810
 colin.mayes@aonhewitt.com                adam.leviton@capitalmsl.com
 

Notes to editors
Aon Hewitt's full research on CDC plans, as well as an eight page summary of the research are both available at http://www.aon.com/unitedkingdom/defined-contribution/collective-dc.jsp


About Aon Hewitt

Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com.


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About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 65,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global partnership and shirt sponsorship with Manchester United.

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