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Aon Benefits & Trends survey highlights key pension trends

LONDON (19 March 2018) – Aon Employee Benefits, the UK health and benefits business of Aon plc (NYSE:AON), has published the results of its Benefits and Trends Survey 2018 which sheds new light on key areas of focus for UK pension schemes.

The eighth edition of the survey on the emerging trends in benefits provision in the UK gathered responses from 200 participants from organisations of all sizes.

Financial education
This year’s survey shows that more organisations are continuing to provide additional retirement services in order to help their employees in pre-retirement.  Pre-retirement seminars remain the most popular form of support to members with their retirement options, and are provided by 44% of respondents. 29% of employers also offer individual non advice sessions for retirees while 27% of the surveyed offer access to independent advice.

Martin Parish, Pension Consulting lead at Aon Employee Benefits, continued:
“Access to independent financial adviser (IFA) services continues to be a popular source of help for employees. However, in our experience few employers run a due diligence process on IFA selection, opening themselves to unnecessary risk and criticism should an employee suffer poor advice and service or suffer financial loss.

“Often companies are using an extension to their corporate adviser services - but corporate pensions advice and personal retirement advice are separate services and skill sets. Offering a retirement broking service instead, which would allow employees to gather information and then seek their own adviser (if they deem advice necessary), is a possible solution.”

Employee engagement
On the key issue of engaging employees on pension issues, the survey found that 82% of companies continue to use email to educate and engage their employees on pension matters, while almost two-thirds (63%) use printed communications. 52% of employers also said that they provided access to an online self-service portal, while 27% offered modelling capabilities.

Martin Parish said:
“It is not surprising that for all the noise in the market about engagement it still boils down to print and face to face communication. In our experience, the most positive feedback on engagement is received in the cases where we deliver face to face interaction with staff. However, this will likely be the one aspect of pension services that will change the most in the coming years. We expect to see employers, advisers and providers to look to deliver engagement mechanisms that mirror people’s wider social interaction methods – social media, web chat, video content etc.”

Fund performance
This year’s results show that – encouragingly - some organisations have switched from reviewing the investment performance of their default option from annually to half-yearly. The responses highlighted that 28% of employers said they reviewed the default option annually, compared with 38% in 2016, while 15% responded they do so half-yearly, up from 8% in 2016, underlining the importance of performance management.

Martin Parish said:
“Investment returns form a key part of an employee’s retirement outcome, so monitoring default fund performance and structure is a key risk management measure that should be part of a formal governance process or discussed in meetings with advisers. It’s critical that organisations conduct a review of default funds to complement the flexibility that employees now have from the age of 55 or at retirement.”

A formal governance committee that meets regularly (53%) remains the  most common arrangement for company pension schemes, with the second most common being meetings with consultants and providers (37%). The proportion of organisations planning to implement new governance arrangements has doubled from 4% last year to 8% this year.

Martin Parish added:
“It’s good news that governance continues to be front of mind and that the upward trend is extending. This is particularly important considering the contribution changes being introduced through auto-enrolment, retirement flexibility and the impact on default funds plus effective communication and the need to ensure employees understand their pension scheme. These are all significant factors and employers need to be on top of them.”

Additional highlights of the survey:
•    Group personal pension plans (GPPs) are still the most popular pension schemes at 59%.
•    With auto-enrolment minimum contributions due to increase over the next few years, the survey found that 56% of respondents need to increase their contributions for 2018 and 2019.
•    Only 24% of respondents said they monitored their pension scheme member replacement ratios and the trend in retirement dates, with a further 20% saying that they didn’t know.
•    39% of respondents said they had reviewed their pension provider since the introduction of Pension Freedoms. However, there were still 45% who said they had not and only 23% said they were planning to review next year. While cost is still the top reason to review provider, it is reducing in significance and investment options are increasingly gaining importance.

Download a copy of the Benefits and Trends Survey 2018

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Colin Mayes                                          Marina Sanchez
Aon                                                       CNC
01372 733689                                         07535 693214                  

About Aon
Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

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