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Aon Hewitt says Queen's Speech will pave the way for Collective DC
NYSE: AON

London, 2 June, 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), has applauded the news that legislation to permit Collective DC pension plan designs in the UK is likely to be included in the Queen’s Speech on Wednesday.

Kevin Wesbroom, senior partner at Aon Hewitt, said:
“The new flexibilities to UK pension plan design to be introduced in the Queen’s Speech are a step we have encouraged and are delighted to see moving ahead.  Employers will have certainty that they will be able to introduce Collective DC plans to provide their members with a regular income in retirement.”

Collective DC (CDC) plans – also known as Target Pension plans -  are pension scheme designs where the cost of the plan is fixed as a percentage contribution rate but the benefits from the plan are targeted, not guaranteed.  The benefits paid from the plan are determined by the performance of the plan assets. For the employer, this design has all the advantages of individual DC, while the individual saver receives a retirement income and the knowledge that they will not outlive their savings.  Analysis by Aon Hewitt has shown that members of CDC plans can receive retirement incomes that are on average one-third higher than those secured via an individual DC plan that is ‘lifestyled’ into an annuity - and at the same cost. 
Another attraction of CDC plans for employers and members is that they do not contain costly guarantees, when compared with other Defined Ambition and DB designs.

Matthew Arends, partner at Aon Hewitt said:
"Many individuals will want to use some or all of their DC retirement savings to generate an income to live on in retirement. This was borne out by the survey of over 200 pension professionals who joined our web briefing on the Budget changes. 73% of respondents said that they expected to offer a combination of cash and income generating strategies in their DC plan.
“Consequently, there will be a need for some form of income generating solution from at least part of members’ DC pots to replace income that previously would have been provided by an annuity - so we can expect a proliferation of market innovation to fill this need.  However, many of these new options will expose members to increasingly complex decumulation decisions. CDC plans have a big role to play because they are pooled vehicles and so avoid the need for members to take investment decisions."

Matthew Arends concluded:
"CDC plans have held the promise of providing the combination of certainty of cost for the employer along with straightforward access to a retirement income for members.  That promise can now become a reality. We envisage that many employers will take the opportunity to use CDC as a core part of retirement savings to provide an income – in addition to fully flexible DC cash savings."
 

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
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 retirement 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.

 

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