LONDON, 1 June 2007 - Pension fund deficits fell to their lowest month-end level in May at £4bn after spending a spell in surplus for the first time since FRS17 was introduced six years ago. Almost half of the largest 200 UK pension funds are in surplus now, rising from almost a third at the end of April.  UK pension fund deficits have improved by approximately £100bn in the last 50 months. Rises in equity markets and bond yields have combined to lift deficits from their peak of over £100bn on 12 March 2003, according to research from Aon Consulting, a leading pension, benefits and HR consulting firm.

Aon Consulting is confident that, over the long term, the number of pension funds in surplus is expected to continue rising and that the aggregate surplus is expected to increase.  The consultancy does not expect, however, that the long-term increases in pension surpluses will prevent increasing number of pension schemes closing to future accruals, as identified in Aon's Employer Survey last month.  Furthermore, the consultancy warns that FRS17 surpluses would need to top £100bn before pension promises can be fully secured with insurance companies.

The analysis is the latest in the monthly tracker of aggregate net surplus/deficit for the UK’s 200 largest Defined Benefit schemes, including all of those in the FTSE-100.  The month end net deficits for the largest 200 schemes since May 2006 is shown graphically below:

During May, BT announced it now has a £1bn pension fund surplus after reporting a £400m deficit as of March 2007.  A key question for many companies will be whether they can recognise the surplus in their accounts.  BT - which closed its defined benefit scheme to new members in 2001 but continues to accrue benefits - is likely to be able to do so.  However, companies that have closed to future accruals (for all members) are likely to find that any surplus is not recognisable in their accounts.

Commenting on these latest results, Marcus Hurd, senior consultant and actuary at Aon Consulting, said: "The era of the pension scheme accounting surplus has clearly begun.   Companies and trustees now face the dilemma of whether to target fully securing pension benefits with insurance companies.  In many cases, however, this would not make financial sense for sponsoring employers, because the aggregate cost of £100bn is prohibitive.  In addition, the insurance market is currently unable to accommodate the required £600bn of pension scheme liabilities.

“Companies should also be mindful of their ability to recognise surpluses in their accounts.  The use of contingent assets and careful wording in schemes’ rules can be critical to ensuring that pension scheme surplus can be recognised by companies when producing annual accounts.”

Comparative figures for the FTSE-100 companies since May 2006 are as follows:

Source: Aon Consulting

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, one of the UK’s largest insurance brokers and providers of risk management services and 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 is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting.  There are 43,000 employees working in Aon’s 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.

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, our ability to execute the stock repurchase program, our ability to obtain regulatory or legislative changes to permit continuous sales of our supplemental Medicare health product, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of investigations brought by state attorneys general, state insurance regulators, federal prosecutors, and federal regulators, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, ERISA class actions, the impact of the analysis of practices relating to stock options, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates.  Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.

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

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