Declining stock market and slashed interest rates blamed by CEO Greg Case

Aon has pulled the plug on its US defined benefit pension scheme to 12,000 staff as it struggles in the economic downturn.

Chief executive Greg Case wrote to staff explaining that the reduction in interest rates and 40% drop in stock market has increased the company’s pension liabilities.

Case described it as “one of the hardest decisions we have had to make”.

The defined benefit scheme – in which the company makes a payout based on the final salary of the employee – closed the scheme to new entrants five years ago, but now it also applies to the 6,000 remaining memebers.

The scheme will not affect staff working for Aon UK, but does apply to those working for the US parent company based in the UK.

In the memo, Case writes: “We have all been attuned to the rapidly changing economic situation, particularly the 40 percent decline in worldwide equity markets and the severe reduction in interest rates.

“These two macroeconomic events, completely beyond our control, have combined to significantly increase both our US pension liability and the potential impact on the US businesses.

“As a result, it became very clear to me that we had to do something.”

No one from Aon was available for comment. The firm is to release its fourth quarter results later today.