LONDON, 24 October 2006 – An increasingly over bearing regulatory regime has been the real Achilles’ heal of the UK pensions industry over the last two decades rather than changes in the tax system, according to Aon Consulting, a leading pensions, benefits and HR consultancy.

A paper for the Institute of Actuaries published this month estimates that changes in advance corporation tax rules introduced in 1997 would cut at least £100 billion from UK pension scheme asset valuations over their lifetimes. The chairman of pensions trade body the National Association of Pension Funds is also reportedly calling on the government to introduce withholding taxes to assist the pensions sector and bring the UK’s tax policy in line with other European countries. 

Donald Duval, chief actuary at Aon Consulting, said: “The pensions act and A-day have significantly increased the burden on trustees in the £800 billion occupational pension scheme sector recently. We expect only 18% of occupational defined benefit schemes to be open to all staff by 2009 and over a quarter (29%) to be closed to everyone (up from 9% in 2006), according to research by Aon Consulting.

“The introduction of age discrimination legislation is the latest set of regulations expected to hurt pensions provision. And, this at a time when politicians from all parties are calling for greater provision. A moratorium on more pensions regulation is long overdue. However, with the national pensions saving scheme and other initiatives on the agenda momentum shows little sign of slowing. The aggregate effect of regulatory changes adds to the risks of running pensions schemes and is extremely damaging.”

Paul Macro, Head of Defined Contribution, said that following the Department for Work and Pensions’ (DWP) consultation paper on age discrimination legislation published this month: “Around one-fifth of DC pension schemes paying contributions that are related to the age of the member may be forced to cut contribution levels or even shut schemes as a result of the new regulations. We urge the legislators to actively address ‘grey areas’ quickly and return the focus to creating a thriving DC sector in the UK.”

Notes to editor:

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 is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon's 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.

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