Broker says it is shunning ‘short-term fix’ to protect business in challenging economic conditions
Aon plans to cut its contributions to employees’ pensions in recognition of the global economic downturn.
The UK’s largest broker said it would cut the standard contribution, but offer to match employees’ contributions up to a specified threshold, depending on their age.
Aon declined to give figures, but said it was entering a two-month consultation with staff. It informed them of its decision on Tuesday.
The move follows the global broker’s decision to close its US-defined benefit scheme – in which the company makes a payout based on the employee’s final salary – in February.
In a statement, Aon said: “In order to protect our business in challenging conditions and to ensure we emerge from the recession strong and successful, no stone is being left unturned during 2009 to drive out further cost and to achieve greater efficiencies. The increasing cost of pension provision is one of these costs.
“Many companies are looking at ways of reducing their fixed costs, examples being pay freezes, reduced hours, four-day weeks and enforced sabbaticals on greatly reduced levels of pay. All of them are short-term fixes,” it said.
“We recognise times are hard for employees, but we believe in taking a different, longer-term view. This approach recognises that employees want to retain their pay to allow them to make choices.
“By offering a lower standard contribution while offering matched contributions, we are seeking to reduce fixed costs while saying to employees who regard saving into a pension as 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’.”
The move comes as other global brokers are also imposing cutbacks.
Willis, for example, recently offered staff unpaid leave as it attempts to slash costs across the group, and Marsh and Aon both announced job losses last year.
In February, Aon posted a 35% drop in net income for the fourth quarter of 2008 to $123m (£82.5m).