Management Consulting
Aon
Full Credential Description
Aon's Global Pension Risk Survey 2019 highlights significant shifts in the management of defined benefit (DB) pension schemes in the UK, particularly regarding liability management. The survey, which included 170 respondents from various schemes, revealed that 65% of DB schemes are now closed to future accrual, a notable increase from 45% in 2015. This trend indicates a growing acceptance of member option exercises, with only 15% of schemes expressing reluctance to implement flexible retirement options, down from 74% in 2013. The tailored solution provided by Aon involved enhancing the understanding and governance of retirement options among trustees, which has led to a proactive approach in managing liabilities. Specifically, 53% of schemes are considering enhanced transfer value exercises, reflecting a significant change in sentiment towards these options. This shift is largely driven by trustees, who now initiate more than half of the activities in this area, compared to previous years when such initiatives were primarily led by sponsoring companies. Quantifiable results from the survey indicate that 49% of schemes plan to utilize annuities or longevity swaps, an increase from 36% in 2017. This growing appetite for hedging longevity risk is supported by improved financial positions and favorable insurance market conditions, allowing schemes to monitor their buyout costs more frequently. The survey found that 40% of schemes now track their buyout positions more often than annually, recognizing the potential for achieving buyout sooner than expected. This proactive management of member options and liabilities is not only enhancing governance but also accelerating the de-risking journey of pension schemes, ultimately leading to better outcomes for members.