Aon has launched a new pensions security indemnity (PSI) policy. The new product will enable companies to improve security for their pension scheme members.
In the event of default, Aon's PSI product will cover a cash injection and is compliant with regulation.
Chief actuary at Aon Consulting, Donald Duval, said: "One of the biggest problems in pensions today is how to give security to pension members without causing major disruption to the finances of the sponsoring employer. This unique product helps to square that circle. It gives security to trustees and members, without tying up large amounts of the company's capital."
Paul Campbell, product development leader, Aon Risk Management Solutions, commented: “The level of pensions deficits continues to create a financial headache for UK companies despite improved investment performance over recent years. Scheme members and trustees are also more aware of the risk to their pension benefits created if the sponsoring employer becomes insolvent.
“With no obvious end to the corporate pensions crisis in the UK, this product from Aon addresses a number of the financial concerns around pensions. It provides another option for businesses dealing with legacy defined benefit (DB) pension issues, in a way that will also be beneficial for trustees and members. PSI can help even those companies with the largest pension deficits in the UK.”
The 200 largest UK pension schemes had a total deficit of £46 billion at the end of November, according to Aon. Typically, scheme trustees could expect to make 60%-70% recovery on the pension deficit in the event of the employer's bankruptcy; a 50% recovery rate has not been uncommon. The PSI product ensures that pensioners can receive up to 100% of their benefits in such situations (depending upon pre-agreed limits) by funding schemes in deficit in the event of the employer's insolvency.
