London, 24 March 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), has said that the announcements on annuities in last week's Budget will certainly have their impact on insurance companies but should not affect opportunities in the bulk annuity market for pension schemes.

Dominic Grimley, principal consultant at Aon Hewitt said:
"The Chancellor may have rocked the pensions world with his Budget Speech announcements but we remain comfortable in recommending bulk annuities to pension schemes in this changed environment. A  good - if now reworked - business model should enable insurers to continue to make money in this market and provide a secure home for pension promises.

"Our view is that the changes outlined in the Budget  will not have a material impact on the security available to bulk annuity policyholders (current or prospective) given the regulatory protections that exist. Depending on how insurers will presumably alter their business models - in light of a reduced demand for individual annuities - their appetite for bulk annuities may well increase, which would be positive for the competitiveness of this market."

The level of capital held by insurance companies has not changed, even if the tax rules for annuities have. Insurance companies' ring-fenced capital reserves for annuities are significant and tightly governed, and a fall in the scope for new business could even be beneficial to policy-holders in the very short term, as less capital will be needed for allocation to new policies, should individual annuity business reduce.

Dominic Grimley continued:
"It is worth reiterating that even if the owners of an insurance company made the extreme decision to stop offering annuities, policyholders remain subject to the substantial protections of the regulatory regime, and cannot be disadvantaged if the annuity promises are ultimately passed to another insurance company which has a stronger ongoing focus on annuities.

"In our view, these changes will pose more questions for the management and investors in insurance businesses, than for defined benefit pension schemes looking to de-risk into what remains a safe environment for backing pension promises."

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

                                                                
Notes to editors

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 66,000 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.