London – 25 April 2005 – Aon Consulting has calculated that compulsory pension contributions in the UK could cost the Government £4 billion per annum in tax relief.
Whilst pensions have been somewhat overlooked in the Labour Party’s manifesto, pension issues still remain a hot topic amongst electoral candidates with the arguments for and against compulsion continuing to be hotly debated.
Aon Consulting calculates that if compulsion was introduced in the UK at a rate of 9 percent of pay (the Australian model), then compulsion would cost the Government £4 billion per annum in tax relief. The additional £4 billion per annum in cost arises because under compulsion money, that would previously have gone in wages or profits, which are taxable, will go into pensions savings, which attract tax relief.
Donald Duval, Chief Actuary at Aon Consulting, said: “With compulsion being on the agenda of many politicos during the build up to the UK Elections, proponents of compulsion need to outline how they will fill the hole in government finances. Whilst over time compulsion would increase private pensions, and therefore reduce the need for the Pensions Credit, in the short term the Government would still face a sharp drop in revenue, which would need to be accounted for.”
Notes to editors
About Aon Consulting
Aon Consulting is a leading human capital consultancy, helping organisations of every size to attract and keep the employees they need. We advise on all aspects of employment, including health-related insurance and risk; employee compensation and pensions; human resource strategy planning; job design and change management; and staff assessment and legal issues. Aon Consulting is a division of Aon, the UK’s largest insurance broker and provider of risk management services, a major force in reinsurance and the UK human capital consulting market. Aon Consulting Limited is authorised and regulated by the Financial Services Authority.
About Aon
Aon Corporation (www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. The company employs approximately 48,000 professionals in its 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.
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