LONDON, 23 November 2005 – In advance of Adair Turner’s recommendation report on pensions, due on 30 November, Aon Consulting, a leading pension, benefits and HR consulting firm, today launched its 2005 European Pensions Barometer.  The barometer summarises the firm’s most recent research into the European pensions landscape[i] and provides a ranking of the pension schemes in these countries. 

The key findings of the research are:

• In spite of repeated reports of the dire state of its pension schemes, the UK is currently performing comparatively well amongst its EU counterparts.  The UK is ranked sixth overall, ahead of similar large industrial economies such as France, Germany and Italy. 

• However, whilst the situation in the UK looks positive on the surface, Aon’s research show that there is no scope for complacency as the inadequate state pension continues to worsen and pensions legislation is stifling company pension provision.

• The percentage of older workers employed (55 – 64 years old) in the UK is amongst the highest in Europe (ranked at number three).  This is good news for the sustainability of the UK pension system as having higher levels of older workers means that such people are generating wealth and not drawing on their retirement savings until later in life.  By continuing to work for longer, there are benefits for both the individual – who is able to save a greater amount – and the state – who will benefit from having a more productive workforce that also generates greater tax revenue by working for longer.   

Commenting on the European Pensions Barometer research, Donald Duval, Chief Actuary of Aon Consulting said: “Despite a lot of the hype, the UK pension system is in reasonable shape overall, but things are going in the wrong direction.  On current policy, the UK will slip steadily down the European rankings because company pension provision is now declining, and the State pension is becoming increasingly inadequate.

“Turner needs to recommend, and the Government needs to implement, actions which will improve the adequacy of the State Pension and revive company pension schemes."

Background

The European Pensions Barometer looks at four key measures.  These are:

• Demographics - based on the net growth in population, the average retirement age and percentage of older workers employed (55 – 64 years old) in each country;

• Affordability and sustainability of State Pension – this focuses on the projected public expenditure on State Pensions by 2050 as a percentage of Gross Domestic Product (GDP), as well as the level of reserves set aside to bolster likely pension costs in 2050 as a percentage of GDP for each country;

• Adequacy of State Pension – which takes into account the pension replacement rate, or proportion of pre retirement income that the State provides in a particular country;

• Percentage of assets in company pensions – this is based on assets of company schemes as a percentage of GDP for that country.

For a copy of Aon Consulting’s European Pensions Barometer, please call 0800 279 5588 or email enquiries@aonconsulting.co.uk.

[1] The research analyses the pension systems in the 15 countries that were members of the EU in January 2004.  Accession countries will be included in future editions of the barometer, as data becomes available.

2 Portugal, which tops the table, has beneficial demographics (a high growth rate and longer working patterns) and good state pensions which are (because of it’s good demographics) reasonably affordable.  While its company pension scheme assets are not large, they are greater than many European countries which have no company pension scheme assets at all.

Belgium, which is at the bottom of the table, has one of the lowest growth rates in the sample, with particularly low immigration.  Its state pension scheme is among the least generous in Europe, and there is very little by way of assets in company pension schemes.

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 broker and provider 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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