London – 6 April 2005 – The Pension Protection Fund (PPF), which comes into force today, is unlikely to reduce the risks being taken by companies running pensions schemes according to Aon Consulting, a leading pensions, benefits and HR firm. Furthermore, the PPF could actually encourage the underfunding of pension schemes.

This warning stems from Aon’s own investment research which concludes that the risk based levies indicated in a memo from the DWP (0.4% of any shortfall in the pension scheme) are low compared to the current market rate for insolvency risk and are therefore unsustainable and may actually encourage companies to underfund their pension schemes.

The research concludes that many companies operating defined benefit pension schemes in the UK would be given a B, BB or BBB rating in the bond market.  This covers a range of companies, and yield required on bonds for this group ranges from 1% to 4% per annum (upwards of 10 times the suggested PPF risk based levy and sometimes more) in excess of gilt yields. This means that the market's assessment is that such companies have a 1% to 4% (or more) chance of defaulting each year.

Chris Squirrell, Senior Consultant and Actuary, at Aon Consulting said: “Compared to the risk premiums implicit in the bond market, the 0.4% rate indicated by the DWP seems remarkably low.  Even when added to the flat rate levy, it seems unrealistic to expect that the current levies can sustain the PPF in the long term.

“This means that, for a company faced with a decision whether to pay a levy or raise capital through the bond market to meet a pension scheme shortfall, simply paying the levy and leaving the scheme under funded would be a better option for the vast majority of companies.  The PPF therefore doesn’t seem to encourage prudence of funding in the way that many would have hoped.”

The research also investigated how schemes might make investment decisions once the PPF is in place.  Using sophisticated economic scenario models, Aon Consulting have demonstrated that the relative risks and returns of different investment strategies do not change as a result of the PPF.

Squirrell added, “If the levies are to act as a disincentive for companies to take undue risk, there would need to be considerably more penal levies for schemes which, for whatever reason, get into significant financial difficulty.  Our analysis shows that no such disincentive exists.

“Ultimately, the success or failure of the PPF will depend on how it copes under the stress of tough market conditions, regular insolvencies and under funded schemes.  Companies and Trustees alike are concerned that the current proposals are not robust enough to stand up to such stresses, and that members will, yet again, be faced with disappointment if the PPF fails to deliver.”

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.