Management Consulting
Aon
Full Credential Description
With the rise of defined contribution (DC) pension schemes across Europe, organizations are increasingly concerned about ensuring that employees are financially prepared for retirement. A significant issue identified is the "massive savings gap," where auto-enrollment alone does not sufficiently prepare employees for their retirement needs. Jenny Swift, a leader in Aons Wealth Solutions practice in the UK, emphasizes that ensuring good investment returns is crucial for providers to influence positive outcomes for members. In response to these challenges, Aon has developed tailored investment strategies that focus on optimizing default investment options within DC schemes. Research indicates that the gap in returns between the top and bottom performing master trust default funds for early career employees in the UK was over 7 percent per year over a five-year period ending in 2023. This disparity highlights the importance of having a well-monitored and diversified default investment strategy that can significantly impact retirement savings over a full career. To enhance investment returns, Aon recommends that DC schemes consider allocating a portion of their assets to high-performing options, including private markets and transitional assets like renewable energy and technology. The introduction of the Mansion House Compact in the UK, which mandates that 5 percent of assets in default funds be allocated to unlisted equities by 2030, exemplifies regulatory efforts aimed at improving pension outcomes. This framework encourages plan sponsors to focus on long-term returns rather than merely cost considerations, thereby enhancing the overall value of pension schemes. The results of these tailored strategies are promising. By aligning investment approaches with the specific needs of employees and regularly reviewing performance against competitive benchmarks, organizations can significantly improve retirement outcomes. Aons insights suggest that a proactive approach to investment strategy can not only address the savings gap but also enhance the attractiveness of pension schemes as tools for recruitment and retention in the workforce.