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Aon Hewitt calls on employers to consider Collective DC ahead of 2016 changes
NYSE:AON

LONDON, 17 February 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), today called on UK employers to start considering Collective Defined Contribution (CDC) pension schemes as a viable pension arrangement, ahead of the abolition of contracting-out in 2016.

Matthew Arends, partner at Aon Hewitt said:
“The end of contracting-out in 2016 will mean increased employment costs for employers as they will no longer benefit from the reduction in national insurance contributions for their employees. We estimate that this could result in additional cost of around 2.5% - 3% of total payroll for DB members. For employers who still offer defined benefit (DB) schemes, this may simply make them unaffordable. We urge them to start considering Collective DC now as a desirable alternative to implementing a defined contribution arrangement in 2016. We also call on the government to provide some certainty as to the timetable for implementing CDC.”

CDC schemes are pension schemes where members’ savings are pooled together into a collective fund rather than being held in individual accounts. By pooling assets, the impact of market volatility on individual members' fund values is reduced and access to additional asset classes, such as more illiquid assets, becomes available. As the scheme also pays the pension, thus avoiding forced annuity purchase, this results in overall materially improved member outcomes, as demonstrated by Aon Hewitt's comprehensive research
(see link below).

Matthew Arends said:
“A Collective DC arrangement will cost employers the same as a standard DC pension scheme, with no extra risk, while offering scheme members average pensions of over 30% higher than a typical DC scheme with the same contribution levels.”

Currently, Collective DC schemes are not legally permitted in the UK, although they are popular in several other countries including Canada and the Netherlands.

The Department for Work and Pensions (DWP) is shortly due to publish the outcome of its 2013 consultation on workplace pensions, ‘Reshaping workplace pensions for future generations’, including the viability of new arrangements such as collective DC pensions.

Pending confirmation from the DWP, Aon Hewitt expects that collective DC will be enshrined in new legislation in 2015, taking effect from April 2016.

Media Contact: 
Colin Mayes                              Giles Abbott
Aon Hewitt                                Capital MSL
01372 733689                             020 3219 8805
colin.mayes@aonhewitt.com       giles.abbott@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

Collective DC workshop for journalists
Aon Hewitt will be running a media workshop on Collective DC between the Budget announcement on 19 March 2014 and Easter on 21 April 2014. More details will be available in the near future but please register your interest now if you would like to attend (aonhewitt@capitalmsl.com).

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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