LONDON - Hewitt Associates, a global human resources consulting and outsourcing company, has today warned that while it expects another wave of UK pension benefit reviews throughout the autumn, implementing pension changes remains a challenge and this is increased by the regulatory changes over the coming months.

Over the past 12 months many companies in the UK have announced major pension benefit reviews. According to a Hewitt survey, conducted in January 2010, over a third of organisations were due to review pension benefits in 2010 with 50% of these leading to closing the defined benefit (DB) scheme to future accrual. Capping pensionable salary, is also gaining in popularity. 

Hewitt predicts that the number of organisations conducting reviews this autumn could now be even higher as earlier drivers combine with newer pressures, such as competitive positioning, changes to pension tax relief and the review of public sector pensions to reduce the appeal of final salary pension provision. However, communication to the membership remains a key challenge, with the proposed move towards CPI based indexation making this no easier.

James Patten, benefit design specialist at Hewitt Associates, said:

"With many pension schemes having already announced significant reductions to benefits, often due to funding issues and tighter risk controls, a further wave of reviews is now on the horizon. These earlier drivers are still a pressing concern, but organisations now have to factor in the impact of new pressures. 

"In such a fast changing market, those organisations that have not recently conducted a pension benefit review may now feel it appropriate to consider how their benefits compare with those of their competitors. Organisations also need to consider the Government's proposed changes to issues such as reductions to pension tax relief, the review of public sector pensions and CPI based indexation."

Pension scheme thinking may now be influenced by factors such as:

• Reductions to pension tax relief: One of the implications of proposed reductions to pension tax relief is that there are likely to be fewer executives continuing to accrue final salary pension provision, potentially further reducing support for existing arrangements at board level.
• Public Sector Pension Review: The public sector has, for many years, been viewed as offering more generous pension provision than the private sector. Hewitt believes that the review of public sector provision may lower this ceiling for many private sector employers. Other private sector employers may be more directly influenced because of public sector outsourcing contracts for example.
• The shift from RPI to CPI: The proposed change to indexation from RPI to CPI makes life no easier when it comes to changing benefits. Trustees and unions will recognise that this is expected to reduce deficits, and may feel a change is unjustified. However, experience in recent months shows that these gains can easily be swallowed whole by unstable market conditions.

James Patten added:

"With highly public precedents being set in the media daily, perhaps the greater challenge for those employers freezing their schemes is communicating these prospective changes to the members.  On RPI to CPI the question of how accrued benefits will increase before retirement is as yet unclear so this will not be an easy task. Employers need to have a strategy in place to deal with this communications challenge."

About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organisations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visitwww.hewitt.com.