LONDON, 18 May 2006 – More than a third of companies (36%) feel that the increasing cost of funding their defined benefit (DB) pension scheme is impacting negatively on their share price, rising to 38% when asked if this will be the case in the future.

This is according to new research¹ released today by Aon Consulting, a leading pension, benefits and HR consulting firm, who surveyed representatives from the UK’s largest defined benefit schemes about the impact that pensions had on their company’s ability to compete, their share price and the price of goods and services.

The research also highlighted that one in two businesses (50%) think that the increasing cost of funding their defined benefit (DB) pension schemes is having a negative effect on their ability to compete effectively in the current market. This rose to 58% when asked if their projected pension commitments in the future would continue to impact negatively on their ability to compete.

Paul McGlone, Principal and Senior Actuary at Aon Consulting, said, “The increasing cost of funding defined benefit schemes has already had an impact on UK business.   Depending on what the future holds, these costs could increase further moving forward.  Companies have a responsibility to their shareholders to ensure that their pension schemes are properly managed.  Even as many companies look to close their defined benefit schemes to new entrants, the existing deficits need to be actively managed, or many companies may have further nasty surprises in store for them.”

The impact that rising pensions costs are having on the cost of goods and services was also raised as a key issue.  According to the research, 40% of companies see pension deficits contributing to the increasing costs of goods and services in the UK as companies look to try and improve the funding levels on their schemes.  Looking ahead, more than a half (54%) of those surveyed forecast that pensions costs will continue to impact negatively on the costs of goods and services in the future.

McGlone continued “The cost of running a defined benefit scheme can not just be looked at in isolation.  The immediate impact might be on a business and its shareholders, but the knock-on effect that spiralling pension liabilities can have is wide-spread and can potentially impact on both business and consumers.  If pension costs continue to rise as they have been, then companies are going to have to look at ways of covering these costs and one way will be to raise the prices of the goods and services they provide.”

Note to Editors:
 
The research surveyed 115 UK companies operating defined benefit schemes in January 2006. Of the 115 companies polled:

• 59% were closed to new members but continued to accrue benefits
• 27% were open to new members and accrual of benefits
• 11% were closed to new members and accrual
• 1% were in wind up

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 (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 53,000 professionals in its 600 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.
 
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