Aon Corp., Chicago, will calculate the benefits offered by its $1.4 billion U.S. pension plan on a career-average-pay basis beginning on Jan. 31, switching from a final-average-pay formula, confirmed Aon spokesman Al Orendorff. The plan was closed to new entrants as of Jan. 1, 2004.
Aon officials have also proposed freezing its U.K. pension plan as of March 31, according to spokesman James White. The change still has to be approved by trustees following an employee consultation period. The 1,700 active employees who would be affected would be able to participate in a defined contribution plan. Aon froze the U.K. plan to new members on Jan. 1, 1999. The asset size of the plan was not available at press time, but according to the company's 2005 annual report, the company had $2.9 billion in global retirement assets and $4.2 billion in liabilities as of Dec. 31.
The proposed changes are expected to result in annual savings of about $60 million, according to a news release issued today.
"We believe these changes will help Aon better manage its overall future compensation cost structure," Greg Case, Aon president and CEO, said in the release. "Over the last five years, Aon has contributed more than $1.1 billion to fund retirement benefits for participants in the U.S. and U.K. plans."