The Trends Driving Global Pension Risk

The Trends Driving Global Pension Risk
December 5, 2023 20 mins

The Trends Driving Global Pension Risk

The Trends Driving Global Pension Risk

The landscape for U.S. and UK pension plans has changed greatly. Companies are mitigating risks to meet regulatory requirements and protect their employees and finances.

Key Takeaways
  1. In the past two years, pension plans in the U.S. and UK have been affected by changing economic conditions, particularly rising bond yields.
  2. Companies have adapted by de-risking plan investments, offloading liabilities via annuities or lump sums, or transferring their fiduciary responsibilities to an outsourced chief investment officer (OCIO).
  3. Two particular risk priorities are ESG requirements (especially in the UK) and cyber risk.


Pension plans across the U.S. and UK have been affected considerably by rising bond yields and inflation, changing regulatory requirements and addressing cyber risk, new research from Aon has found.

“The pensions landscape has changed significantly over the past two years,” says Matthew Arends, partner and head of UK retirement policy at Aon. “We have a perfect storm of sizable changes, limited resources and increased compliance requirements, which are leading to real concerns about managing priorities.” 

In Depth 

Aon’s recent Global Pension Risk Survey was responded to by more than 200 UK-based pension plans and more than 100 U.S.-based companies to discover how this environment has influenced their pension plan strategies. These risk factors and changing priorities emphasize a greater need for employers to manage the potential risk of their pension plans to protect their workforce and their balance sheets. 

Outlooks on Funding and Derisking Pension Plans

Seventy-eight percent of U.S. companies surveyed said they would be maintaining their plans over the long term, with 83 percent of companies saying they were intending to manage plans in lower-risk ways, including shrinking them over time. 

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We see many plan sponsors shrinking their plans when they can do so at a good price — but that’s different than terminating plans altogether.

Eric Friedman
Partner and U.S. Director of Content Development at Aon Investments

A little over half, 55 percent, of respondents in the UK reported that they would be aiming to buy out their pension schemes, which would eliminate the risk by transferring the pension liability to an insurance company.

Meanwhile, in both the U.S. and UK, more and more companies have been engaging outsourced chief investment officers (OCIO) or other form of fiduciary investment management to help plans shift the responsibilities so they can assume less operational risk while undertaking more complex investments. The 2022 gilt crisis in the UK has caused more pension plans to look more favorably upon fiduciary management as a result of their experiences. In the U.S., 34 percent of respondents had already delegated responsibilities to an OCIO in 2023.

ESG Risks for Pension Plans

The Global Pension Risk Survey found that environmental, social and governance (ESG) is a much more significant pension-plan consideration in the UK than in the U.S. In fact, 87 percent of survey respondents in the UK said they were committed to either developing their own ESG policies or remaining compliant with a default set of policies. Although 40 percent of UK companies have already implemented an ESG focus on their equity portfolios, only 5 percent of US respondents have an ESG policy in place and have made changes to their investments to align with it.

The UK has already put ESG-related regulations in place that pension plans are required to follow. For example, larger UK pension plans must comply with regulations that have been set by the Task Force on Climate-related Financial Disclosures. Meanwhile, the U.S. does not have the same level of specificity in its requirements. The US Sustainable Investment Forum reported that other institutional investors are prioritizing ESG. 

Navigating Cyber Risk

According to the survey, the number of pension plans in the UK that had reported a cyber incident increased from 7 percent to 14 percent in 2023.

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Pension plans’ records include sensitive personal information on hundreds of thousands of citizens. Plans also engage in very large asset transactions, which makes them potential targets.

Matthew Arends
Partner and Head of UK retirement policy at Aon

Many pension plans use third-party administrators to keep track of their records. This raises concerns about third-party risk and whether these suppliers are adequately protecting themselves against cyber threats. According to the survey, 68 percent of UK respondents said they planned to increase their focus on cyber risk. In the U.S., most respondents said they had already taken action to address cyber risk with strategies such as assessing their third-party partners’ cyber resilience and putting insurance policies in place to cover fiduciaries or trustees.

General Disclaimer

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Terms of Use

The contents herein may not be reproduced, reused, reprinted or redistributed without the expressed written consent of Aon, unless otherwise authorized by Aon. To use information contained herein, please write to our team.

Additional disclosure
To create the 2023 U.S. report for the Global Pension Risk Survey, Aon relied on a survey of Aon’s contacts with U.S. single employer pension plans, conducted from April through June 2023. 

Responses from the survey were analyzed and aggregated to create summary results. Respondents received no incentive for taking part in the survey.

The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Nothing in this document should be construed as legal or investment advice. Please consult with your independent professional for any such advice. To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Aon. 

The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice. 

Investment advice and consulting services provided by Aon Investments USA Inc. (“Aon Investments”). The information contained herein is given as of the date hereof and does not purport to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information set forth herein since the date hereof or any obligation to update or provide amendments hereto. 

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