Aon U.K., the London-based arm of Aon Corp., is proposing to reduce its standard employer pension contributions in an effort to control costs against the backdrop of the global economic downturn.
Aon U.K. said it was in a two-month consultation with employees about reducing its employer contribution to staff pensions to 6% with an offer to match employee contributions up to a certain level depending on the employee's age group.
Under the proposed new arrangement, employees in their 20s and 30s would be asked to make a minimum contribution of 2% of salary and would receive the standard employer contribution of 6%. The company also would match the 2% contribution.
Employees in their 40s would be required to make a minimum contribution of 2% of salary and would receive the standard employer contribution of 6%, and Aon would match employee contributions up to 4% of salary.
For staff of 50 years of age and older, Aon would require a 2% minimum employee contribution, pay the standard employer contribution of 6% and match employee contributions up to 6% of salary.
Under current arrangements, Aon’s standard employer contribution for employees in their 20s is 6% of salary with a minimum employee contribution of 2% of salary. For employees in their 30s, Aon contributes 8% of salary if the employee contributes 2%. For employees in their 40s, Aon's standard contribution is 10% of salary when employees contribute 2%. And for employees in their 50s and older, Aon’s standard contribution is 12% when employees pay in 2%.
“In order to protect our business in challenging conditions and to ensure we emerge from the recession strong and successful, no stone is being unturned during 2009 to drive out further cost and to achieve greater efficiencies,” Aon officials said in a statement. “The increasing cost of pension provision is one of those costs.”
Aon said its proposal would reduce fixed costs but would give the message to employees who consider pension saving a priority: “If your retirement provision is important to you and you are prepared to invest in it, then we will back you and invest in it, too.”
Sarah Veysey is a reporter at Business Insurance, a sister publication of Pensions & Investments
