London – 6 December 2004 – Uncertainty about retirement income is a key issue that is keeping UK employees up at night.  This is according to a survey[i] by Aon Consulting, a leading pensions, benefits and HR consulting firm, which found that 2 out of 3 (67%) UK employees rate predictability of retirement income as being very important or critical to them. 

As an increasing number of Defined Benefit (DB) schemes in the UK close to new members, and with more companies now switching to Defined Contribution (DC) schemes, the issue of being able to accurately predict what their income will be at retirement is again on the minds of many employees.  Whilst companies have managed to reduce the level of uncertainty of pension fund investment building up on their company balance sheet, this shift has transferred the uncertainty of saving onto employees, who are now faced with the difficult task of predicting what their income will be at retirement.

Commenting on the results, Paul Macro, Head of DC at Aon Consulting, stated: “Recent speculation over the health of many UK pension funds, coupled with the ongoing move towards defined contribution schemes, has led many UK employees to look for more reassurances about what their income will be upon retirement.  In a DC scheme this can be very difficult, and as more employees face up to the uncertainty of their retirement income under DC, employers will come under increasing pressure to help employees understand how to tackle the issue of retiring with a decent pension.”

The survey, of 1500 UK employees, also highlighted that whilst UK employees are looking for some sense of assurance that they will have the means to retire when their pension reaches maturity, only 3 out of 5 (60%) respondents believe that the combination of their company and state pension schemes will provide them with an adequate retirement income. 

However, whilst the remaining 40% of UK employees are worrying about whether they will have enough money in their pension pot to retire, only 1 in 4 (25%) individuals within this group are actually making voluntary contributions.  The rest of this group plan to make up any anticipated  shortfall in their retirement income in the following ways:

• 1 in 2 (50%) people planning to supplement their pension scheme through some other means.
• 1 in 6 (16%) people plan to defer their retirement until they can afford it, and
• Just under 1 in 10 (8.5%) of people planning to accept a lower level of income in retirement.

Macro continued: “ As the pensions industry continues to change it is important that employers take the time to understand what is going on in the pensions arena and help to educate and stimulate appropriate action amongst their employees, many of whom simply do not understand what should be the relatively easy concept of saving for the future.” 

Aon Consulting suggests the four key actions employers and employees need to take to deal with the growing concerns over predictability of retirement income are:

1. Assess – Employers need to assess the current situation on behalf of their employees when it comes to pension provision.
2. Advise – Employers need to advise and educate their employees of their situation and the level of uncertainty that they may or may not face.
3. Accept – Employers need to encourage their employees to accept and address these issues rather than take a ‘head in the sand’ approach to saving for retirement.
4. Act – Employers then need to work with employees to take action to address the most pressing pension issues facing their employees.

Macro concluded:   “One of the most important things which UK companies can do in relation to pensions is make their staff acknowledge just how important saving for a decent pension is.  If employers are able to take a more active role in driving action amongst their workforce when it comes to saving for retirement, many of the current issues faced relating to the predictability of DC schemes can be addressed.”


Note to Editors:

1. Conducted in August 2004, the Pensions @Work survey collated responses from 1,500 individuals from across the UK. Each respondent is employed in an organisation with 20 or more employees. The survey forms part of Aon Consulting’s long-standing @Work research, which annually measures UK workforce commitment.  Please ring the following number: 020 8970 4475 for a copy of the report.

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.



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Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.