LONDON  –   3 May 2005 – As life expectancy continues to increase, new research out today from Aon Consulting has confirmed that working longer is something that UK employees must come to accept.  With no clear directive emerging from the political parties in the lead up to the election regarding changes to the state retirement age, Aon’s research confirms that UK employees need to recognise that they will need to either work longer or save more to fund their retirement.

Looking back to the 1980s, the average retirement age for males was 65, while the average life expectancy was around 80.  This meant that the average worker had around 3.4 years at work to save for each year of retirement.  Now, whilst the average retirement age has fallen, average life expectancy has increased to the point where the average worker now has only 2.2 working years to save for each year of retirement.  (See table 1)

Paul McGlone, Principal and Actuary at Aon Consulting, said: “The combination of increasing life expectancy and reducing working lifetime is a double whammy as far as pensions are concerned – not only does retirement cost more but individuals have less time to save.  The levels of saving required to maintain our current retirement ages are simply unsustainable.

“To the extent that young people spend longer in higher education and therefore start work later, the figures look even worse.  Things won’t get any better unless some fairly drastic action is taken.”

The research also considered the question of what would need to happen for the balance of work and retirement to be restored.  This involves the holy trinity of savings, retirement age and retirement income – to the extent that if any one of these changes, there are implications for the other two.

The research concluded that to return to a work to retirement ratio of 3.4 would involve increasing average retirement age from the current 63 to 68, and that maintaining that ratio over the next 40 years is likely to require an increase in the average retirement age to over 70.

McGlone continued: “Even a work to retirement ratio of 3.4 means that in order to retire on a good pension, individuals need to save a significant proportion of their income – certainly in excess of 10% of their salary – throughout their working lifetime.  At the moment the work to retirement ratio is lower, which means that the amount required to save for a good pension is significantly higher than this – perhaps 15-20% of salary.  For most individuals, particularly those without assistance from employers, this is not affordable.

“The alternatives for the individuals are clear – if you don’t want to be poor in retirement, either save more or work longer”.

Notes to Editors

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, the UK’s largest insurance broker and provider of risk management services, 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 (www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. The company employs approximately 48,000 professionals in its 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 relating to future results, 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 the general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, exchange rates, rating agency actions, resolution of pending regulatory investigations and related issues, including those related to compensation arrangements with underwriters, pension funding, ultimate paid claims may be different from actuarial estimates and actuarial estimates may change over time, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual costs of resolution of contingent liabilities and other loss contingencies, and the heightened level of potential errors and omissions liability arising from placements of complex policies and sophisticated reinsurance arrangements in an insurance market in which insurer reserves are under pressure.  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.