London, 27 June, 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), has welcomed the publication of the draft Pension Schemes Bill, including the introduction of Collective DC plans, but says that for some employers, the immediate focus on pension benefit design may be elsewhere.

James Patten, head of Pension Benefit Design at Aon Hewitt, said:
“We welcome the new range of flexibility that the Pension Schemes Bill and the introduction of Defined Ambition plans will create. Collective DC will be a very attractive option for many employers, including those that might participate in industry wide arrangements, and we would hope this is a realistic option for employers to put in place by April 2016.

“The introduction of Defined Ambition plans will be helpful in the longer term but it will take time for the industry to innovate scheme designs that could provide more stable pension incomes in a way that is attractive to employers. In the interim, some employers - perhaps where Collective DC might not be a preferred option - may need to look to already available alternatives when considering their immediate pension benefit design issues.”

James Patten continued:
“Employers with defined benefit (DB) schemes will naturally be turning their attention to dealing with the additional National Insurance costs they face from April 2016 (worth around 2.5% p.a. of payroll for active DB members) when contracting-out ends. Perhaps one disappointment from the Pension Schemes Bill was the premature death of Flexible DB. The previously proposed removal of statutory pension increases, which has now been shelved, could have been a useful mechanism for mitigating this additional cost. Employers will now need to consider other options for dealing with the cessation of contracting-out.

 “Those with DC arrangements will be focusing on the implications of the 2014 Budget, and the changes that need to be made to existing arrangements. One of the key themes from the DWP’s first paper on Reinvigorating Workplace Pensions was the importance of scale in DC arrangements. Now might be an appropriate time for employers - perhaps with smaller standalone DC trusts - to consider whether an alternative such as a master trust could provide greater economies of scale and to address some of the challenges created by the greater governance requirements on DC arrangements.”

Media Contacts:
Colin Mayes                                            Marina-Jane Sanchez
Aon Hewitt                                               Capital MSL
01372 733689                                          020 3219 8811
colin.mayes@aonhewitt.com                     marina.jane-sanchez@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 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.