London – 29 April 2005 – DC scheme provision is not meeting the needs of scheme sponsors – especially small to medium sized companies, according to research carried out by Aon Consulting, a leading pensions, benefits and HR consulting firm.¹

Those with bundled schemes (with all services provided by an insurer), which accounted for more than two-thirds of the companies surveyed, are feeling disillusioned with their provider and want more flexibility with regard to investment guidance, better communications and online access to scheme information for members.

Until now, much of this flexibility has only been available to schemes opting for unbundled pension provision (‘best of breed’ solutions offered by different specialist suppliers), which can be uneconomic for smaller schemes. To meet the need for greater flexibility and cost effectiveness, Aon Consulting has launched   Aon Defined Contribution+partnering with Friends Provident and Prudential.

Aon Defined Contribution⁺ provides:

• A series of ‘principal’ items – including communications, investment choices and guidance, member-specific online projections and scheme monitoring and risk assessments – which can be supplemented by additional items such as member presentations / advice, and non-pension benefits such as life assurance.
• The ability to customise many elements of the scheme, without the potentially high costs associated with fully bespoke arrangements to increase employee appreciation and understanding.
• The freedom to arrange the scheme either with trustees overseeing its running or as a series of individual pension contracts.
• The ability for the employer to choose whether administration costs are paid for directly by themselves or by deductions from members’ funds, with additional deductions being possible to offset other scheme running costs.
• The ability for employers (especially those with small to medium-sized schemes) – to be able to set up and run a DC scheme which meets best practice, and minimises future risks of liability being levelled at them by employees, in a cost-effective way.

Commenting on this new approach, Paul Macro, Head of DC at Aon Consulting, said:

  “As was highlighted in our research, the DC market is currently not supplying its small to medium sized customers with everything they need and with the steady shift towards DC schemes there is a need for a product such as Aon Defined Contribution⁺ that will suit many schemes both before and after A-Day. Currently these employers must choose between potentially expensive unbundled schemes and bundled schemes whose low cost set up is achieved by sacrificing flexibility and the ability to offer members the information they need to exercise choice.”

“Through Aon Defined Contribution⁺ we intend to meet the demand for cost effective yet flexible scheme provision by combining these two elements to provide DC schemes which will increase employee appreciation and understanding, and reduce potential future liabilities for scheme sponsors.“

Simon Clamp, Managing Director UK Sales & Marketing at Friends Provident said: "We will see significant changes and opportunities in the pensions market as A-Day approaches. This important development, distinguishes Friends Provident as a leading player in the defined contributions market. And the announcement is timely, given that we believe A-Day is likely to encourage trustees to review their existing DC schemes and for major consultants like Aon Consulting, to seek partners who can provide quality administration."

Andy Curran, Business Development Director, Prudential, said: “In this exciting and developing ‘semi-unbundled’ market, our financial strength, quality of proposition and improved fund range has set us apart from the competition. This arrangement is further evidence of continued growth in the corporate market and is another important step towards delivering our growth strategy.”

Notes to editors