Aon Market Data

Aon, one of the world’s biggest insurers, is cutting payments to its workers’ defined contribution pension schemes in the UK, in a bid to shore up costs.

It is thought that the UK subsidiary of Aon Corporation of the US is the first large British-based company to annnounce such measures, which will in some cases see pension contributions slashed by up to half.

An Aon UK spokesman said: “In order to protect our business in challenging conditions and to ensure we emerge from the recession strong and successful, no stone is being left unturned during 2009 to drive out further cost and to achieve greater efficiencies. The increasing cost of pension provision is one of those costs.”

Aon’s existing scheme requires employees to contribute 2 per cent in pay, while the company puts in between 6 and 12 per cent of pay depending on their age. The new scheme proposes to cap the contribution at 6 per cent of pay for workers who choose to continue saving at the current rate. This means employees will have to pay up to three times current contributions to keep Aon’s matching payments at present levels. However, if employees over 50 choose to contribute 8 per cent of pay into their pension, Aon will contribute 12 per cent of pay.

Aon said that while many companies are introducing pay cuts, four day working weeks or enforced sabbaticals, it was taking a “different, longer term view,” through the changes to its pension scheme.

The company is engaging staff in a two-month consultation before the introduction of the scheme. Aon’s American parent, Aon Corporation, moved into the UK about a decade ago. It owns Bain Hogg, Alexander & Alexander, Alexander Howden group and Minet, and began trading as Aon Limited in Britain in 2001. It is known for its risk management practice in the UK and also operates a pensions consulting business. It transformed itself last year with the acquisition of Benfield, the London-listed reinsurance broker.

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