Released on: December 1, 2007, 4:05 am

Press Release Author: Iain Martin

Industry:

Press Release Summary: Many of the large number of employers sponsoring defined
contribution (DC) schemes are shying away from the practical implications of
operating their DC arrangements. Aon Consulting, a leading pension, benefits and HR
consulting firm, issued the warning as a report issued today by the Pension
Institute concluded that DC schemes are being undermined by lack of attention by
sponsoring employers and the passive attitude of members to making investment
decisions.

Press Release Body: Many of the large number of employers sponsoring defined
contribution (DC) schemes are shying away from the practical implications of
operating their DC arrangements. Aon Consulting, a leading pension, benefits and HR
consulting firm, issued the warning as a report issued today by the Pension
Institute concluded that DC schemes are being undermined by lack of attention by
sponsoring employers and the passive attitude of members to making investment
decisions.

Aon Consulting, who co-sponsored the report, believes that a member's investment
strategy is one of the key decisions that determines the eventual size of the
benefits realised on retirement. Despite this, 94% of members in DC schemes accept
the default option, according to the report, believing it to be appropriate for
themselves. However, in many cases too little thought is put into deciding what the
default fund should be and many employers with DC schemes are stopping well short of
offering suitable support to their employees to enable them to invest appropriately,
due to the perceived risks of 'giving advice'. All of which could result in severely
disappointed employees at their time of retirement.

Aon Consulting believes that consultants can play an important role in improving
investment options and default funds. They can provide sponsors with the tools they
need to develop DC schemes into arrangements that meet the expectations of all
parties involved. Default funds are a key element of the Consultants' Best Practice
approach to DC. Within this is an approach to considering the likely requirements of
members, and detailed advice on appropriate default funds. Aon Consulting warns
that as significantly more employers close defined benefit schemes to future
accrual, there will be a massive rise in the proportion of employees' retirement
income dependent on DC funds and hence subject to these risks unless Best Practice
is adopted.

Paul Macro, head of Defined Contribution Pensions at Aon Consulting, said: "Trustees
and employers need to follow Best Practice and have robust scheme investment choices
and governance structures in place. This is likely to become more business critical
with the expected influx of members being moved out of final salary schemes into DC
schemes. This includes ensuring that any default funds meet the needs of all
members, not just Mr (or Mrs) Average. Worryingly, the Pension Institute's report
warns that 69% of pension experts said the typical investment arrangements in DC
pension plans do not currently meet most members' needs. Therein lies a key area
where pension consultants can help sponsors.

"The driver for investment selection should always be to provide members with their
desired outcome. The twist, though, is that this outcome is not always achieved by
aiming for the largest fund - a feeling of comfort and security is an overriding
concern of many, and we need to be careful of believing that everyone is the same.

"There are many challenges facing the pensions industry as employers continue the
shift to DC arrangements. The Pensions Institute report highlights the potential
pitfalls that lie ahead for employers with DC offerings. Sponsoring employers need
to work with their advisers to deal with the issues raised by the report promptly to
ensure that scheme members all invested appropriately to their needs and thus can
have well placed confidence in their employer's arrangements."

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.high
value home insurance


Aon UK is ranked by A.M. Best as the number one global insurance brokerage based on
brokerage revenues and voted best insurance intermediary, offering classic car
insurance, high
value home insurance, entertainment and media liability insurance and
construction insurance.


Web Site: http://www.privateclients.aon.co.uk/privateclients/microsites/household/

Contact Details: directory@vandelay.co.uk