Medical Claim Coding Changes Could Lead to Delays in Claim Payments, Unanticipated Bills for Patients (29 September 2015)
Aon urges pension schemes to view CMI model based on latest mortality data with caution (28 September 2015)
Tips for Maximizing Your Health Benefits During Annual Enrollment (24 September 2015)
Aon survey says 80% of schemes have responded to Pensions Freedoms (17 September 2015)
Aon launches Bigblue Touch 4life (14 September 2015)
More than Half of Leading CHROs are Not Career HR Professionals (9 September 2015)
Gaps in Talent Management in Singapore - CEOs Views and Employees' Expectations (8 September 2015)
Aon Hewitt Fiduciary Management Survvery 2015 shows UK pension schemes continue to increase use of delegated services (7 September 2015)
Three-in-Five US Workers May Need to Work Past Age 65 (1 September 2015)
Market falls give food for thought for mid-valuation pension schemes says Aon (1 September 2015)
Aon Health experts available to comment on implications for companies, individuals and providers
September 29, 2015 — On October 1, 2015, the health care industry will switch to a new set of medical codes that will need to appear on all future medical claims. The new tenth revision of the International Classification of Diseases (ICD-10) contains far more detailed clinical information than the previous set of codes and increases the number of codes from approximately 18,000 to over 140,000. According to experts from Aon Health, this complex conversion could lead to disruptions across the medical field, impacting providers, patients and employers:
- Providers using improper or outdated codes will have their medical claims denied and will need to resubmit claims with the proper coding.
- Providers are likely to experience a delay in their claims submissions while they and their office staff/coders gain familiarity with the new codes.
- Both scenarios may result in overall claim processing delays, which may lead to a temporary decrease in claims volume and alter claims funding forecasts.
- If providers experience a delay in reimbursements from carriers, there may be a rush to collect payments from patients. These patients may erroneously be billed for medical services that should have been covered (e.g., preventive services) or for amounts that the provider should be writing off (e.g., discounts on negotiated rates).
- Some individuals may have insurance claims that are denied for services that were provided but not properly coded.
- Individuals may see a delay in authorization for expensive tests and medical procedures from their insurance carrier if the tests and procedures are not accurately coded.
- Employers should inform their HR, Benefits departments and call centers that they may receive increased inquiries from employees about future Explanation of Benefits (EOB) documents and provider bills.
- Employers should communicate to their employees about the changes to the coding requirements and advise them to be diligent in reviewing their EOBs and provider bills.
- Employers should advise their financial teams to expect some volatility in claims spend during the 4th quarter of 2015 and into the first half of 2016.
- Employers that have already scheduled a claim audit in the second or third quarter of 2016, or are considering one, may have the added benefit of verifying that carriers are correctly paying claims under the new ICD-10 coding.
To schedule an interview with an Aon spokesperson, please contact:
Meg Cotiguala, 312-459-3470, firstname.lastname@example.org
Maurissa Kanter, 847-442-0952, email@example.com
LONDON, September 28, 2015 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has urged schemes and insurance providers to consider the mortality projection model published today by the Continuous Mortality Investigation (CMI), based on the latest ONS (Organisation for National Statistics) deaths data, with caution and remain focused on the longer term trends.
ONS data show that 2015 has been an exceptionally heavy year for mortality so far, with over 25,000 more deaths than the 300,000 expected in England and Wales over the first seven months of the year. A significant number of these additional deaths may be due to last winter's ‘flu vaccine’ being less effective than usual, but mortality has also been heavier than expected for the remainder of the year.
Pension schemes and insurance companies use longevity (life expectancy) projections to place a value on their liabilities, and insurance companies also use them to set annuity prices.
However, Aon Hewitt believes that this data needs to be treated carefully and encourages schemes not to place too much weight on recent movements in mortality rates when setting assumptions for the long term future.
Martin Lowes, partner at Aon Hewitt, said: “Longevity projections are key for the future planning for both pension schemes and insurance companies. However, they should not allow their projections to over-react to annual changes in the numbers of deaths as these may be caused by one-off factors rather than being part of a long term trend. Since 1995, the trend has been remarkably consistent until recently and therefore we would caution against a knee-jerk reaction based on just seven months of new data.
“ONS data has shown that mortality figures in 2012, 2013 and 2014 were also heavier than expected based on the improvement trend over the previous 20 years, and it is reasonable to take account of this – but we urge schemes to think carefully about how much weight to place on these more recent changes as against the previous long-term trend.”
Martin Lowes continued: "Life expectancy is still increasing, just perhaps not quite so rapidly as before. We will need to see what happens to mortality rates over the next few years to help us judge the extent of this slowdown."
Aon Experts Provide Strategies for Optimizing Health Care Choices in 2016
LINCOLNSHIRE, Ill., September 24, 2015 – Open enrolment is around the corner, which means U.S. employees will soon need to prepare to make some important decisions about their health care benefits.
“Employees should actively review their health coverage options to be sure they are selecting a plan that will best meet their needs in the coming year. While most employees are not likely to see significant changes in 2016, costs are likely to change,” noted Craig Rosenberg, Health & Welfare Benefits Administration practice leader at Aon Hewitt. “Aon estimates the average employee spent more than $5,000 in premiums and out-of-pocket costs this year, so it’s important to be proactive and carefully review the options available.”
To help employees optimize their health care and other benefits choices, Aon Hewitt offers nine tips this enrolment season:
1. Participate in the enrolment process. Your employer may be making changes so the plan you chose last year might look different than it does for the coming year. Making an active decision during enrolment will help you avoid being defaulted into a health care plan that doesn’t meet your needs— or even worse— leaves you with no coverage at all.
2. Determine the best source of coverage for your dependents. Coverage may be available to your dependents through your plan, your spouse or partner’s plan, or their own plan, if adult children. Plan design (e.g., deductible, services covered), provider networks, and pay check costs can vary so it’s important to carefully review and compare these plans to ensure you are choosing the coverage you need at the optimal cost.
3. Reassess your and your dependents’ health care needs. Reserve some time before open enrolment begins to take a fresh look at your health care needs for the year ahead. Consider how much you’ve spent out-of-pocket (e.g., deductibles, co-pays, and co-insurance), the number of doctor visits you typically make and the cost of regular prescription drugs.
If you are participating in a Health Care Flexible Spending Account (FSA), evaluate if your contribution is too little or too much based on your actual and anticipated expenses. Be sure you understand what happens if you don’t use up your full balance for health care expenses you incur during the year.
4. Don’t buy on price alone. The cost to purchase your health plan is just one part of the decision-making equation. Consider how much you’ll spend out-of-pocket to use the coverage – for example, meeting your deductible, paying for office visits or prescriptions. Like any insurance plan, it’s important to buy the right amount of coverage based on your needs – buying too much or too little coverage could cost you money.
5. Explore other health plan choices offered by your employer. It’s easy to get comfortable with the plan you’ve been enrolled in for years but the combination of your changing needs and new or updated plans available from your employer mean there could be other choices you should consider.
For example, many employers offer Consumer-Driven Health Plans (CDHPs). CDHPs often have lower premiums, and a growing number of employers are making these plans more attractive options for you to consider. Of the companies that offer CDHPs, many subsidize premiums for these plans at a higher rate than other plan options.
CDHPs may include a higher deductible but they are often paired with Health Reimbursement Accounts (HRAs) or Health Savings Accounts (HSAs), which you can use to help pay for eligible out-of-pocket health care costs. Funds you contribute can earn interest and grow tax-free. In some cases, your employer may also make contributions to your HSA.
6. Evaluate your plan’s provider network. Most employers provide access to tools that let you review which doctors participate with each health plan. Make a list of your family’s doctors and use these tools to verify whether they are in-network for health plan choices you are considering.
7. Take advantage of opportunities to improve your health and lower your health costs. Most employers offer tools and programs such as health risk questionnaires and biometric screenings (e.g., blood pressure and cholesterol screenings) to help you understand more about your health. You may be able to take advantage of a financial incentive from your employer for doing so, typically ranging from $50 to $500. Some employers offer an even greater reward to employees who take action, such as comply with medications or participate in health coaching. The incentive amounts are typically greater in these cases: 44 percent of companies offer incentives of more than $500!
8.Take an additional step if you are enrolled in COBRA. If you are enrolled in COBRA coverage that will continue into next year, you’ll also be eligible to participate in the open enrollment process. If you do not have other coverage available (such as through a new employer), consider coverage available through the Marketplaces that were established by the Affordable Care Act (Health Care Reform). You may find more cost effective choices and may be eligible for government subsidies. Visit healthcare.gov to learn more.
9.Take a “health and wealth” view to spend your dollars wisely. It’s important to look holistically at your health and financial wellbeing, including health care, income protection (e.g., life and disability insurance), and retirement planning. Does your spending reflect your needs and priorities? For example, if you aren’t contributing to your 401(k) plan, now may be the time to start. Beginning to save earlier in your career helps to ensure you’re on track to meet your long-term savings goals.
LONDON, September 17, 2015 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has announced the results of a survey which showed that 80% of defined benefit (DB) pension schemes have amended their retirement processes as a result of the new Pensions Freedoms.
The survey which was conducted this summer with over 200 DB schemes, asked them how they had responded to the Pensions Freedoms that were announced in the 2014 Budget and which came into effect in April this year.
Key findings included:
- Over 80% of schemes have taken some action to amend processes and communications in light of the new flexibility.
- Around a third of schemes are now quoting transfer values (CETVs) in retirement packs, with a further 20% likely to follow suit shortly.
- 40% of the schemes quoting CETVs are also providing members with some access to independent financial advice so members can make informed decisions on the options available.
Ben Roe, partner and head of Liability Management at Aon Hewitt, said:
“As was expected, it is the larger pension schemes of over £500 million in assets – and with resources to match – that have led the way in making changes. So far smaller schemes have generally not made significant changes with most simply choosing to include generic wording on the new flexibilities within regular newsletters and retirement packs.
“Even so, the responses vary. Large schemes have generally been at the forefront of introducing risk reduction measures so not surprisingly they have also led on making changes in response to the Budget, as more than a third are planning to quote transfers in the retirement pack. This in turn can lead to significant savings against funding and long-term targets. There is evidence that some companies are also taking advance credit for likely liability gains in their P&L.”
The survey findings show that less than 10% of schemes are making any additional support available to members at retirement.
Ben Roe said: “What is disappointing is the relatively low numbers of schemes which are offering meaningful support to members on what is now a more complex decision for them. Not only does additional support lead to better member decisions but our statistics show that this also leads to more members taking a transfer, which ultimately means more cost and risk reduction for companies.
The ‘At Retirement’ service that offers drawdown, annuities and financial aggregation tools in an easy to access service
LONDON, September 14, 2015 — Aon Employee Benefits, the UK health and benefits business of Aon plc (NYSE:AON), today launched Bigblue Touch 4life, its fully comprehensive online retirement planning platform for pension scheme members.
While this service is a standard part of Aon’s Bigblue Touch GPP it is now being offered to retiring members of any scheme.
Debbie Falvey DC Proposition leader at Aon Employee Benefits said: “We are seeing many trustees wrestling with the issue of how to offer their members access to the full range of pension freedoms - especially drawdown – but without abandoning them to the retail market. Bigblue Touch 4life is a perfect solution to that problem.”
Bigblue Touch 4life is an ‘At Retirement’ service which allows members to consolidate all their pensions and financial information onto one online platform through Aon’s proprietary financial aggregation tool, ‘Money’. It includes comprehensive pension modelling tools and education, allowing scheme members to test many possible scenarios for their retirement finances and then transact online and access advice - if they need it.
In addition to support, educational material and modelling tools, Bigblue Touch 4life provides members with:
- Full access to an annuity broking service for members to compare prices and to select the provider and annuity which best matches their individual requirements from a wide range of providers.
- Access to a range of investment funds and strategies that have been designed and created for by Aon Hewitt’s global investment team. These funds and strategies are managed for members and changes can be made without the need for individual member consent. This gives members the comfort of the investment oversight to which they are accustomed in trust-based DC schemes but at a low cost which offers excellent value.
- Access to a wider selection of carefully researched investment funds if the wish to make more active choices.
- Access to cash withdrawal and flexible income drawdown.
- The ability to combine several different options to create a retirement profile specific to each member’s unique needs.
Debbie Falvey said: “Choosing how and when to make the transition from working life to retirement is immensely challenging and, in the past members have had little flexibility to decide how best to manage their retirement income in a way that suits them. With increased freedoms since April this year, there is now a great deal more choice, but this needs to be supported and guided responsibly.
“Bigblue Touch 4life helps members make sense of their options. It allows them to make fully informed decisions and to structure their retirement savings in a way that has previously been impossible.
Debbie Falvey continued: “When considering the design of Bigblue Touch 4life we wanted to enhance members’ investment options. Traditionally, members wanting to draw down have had to take advice to create their drawdown strategies, and they have often been faced with high retail fund charges. We are now offering a wide range of funds and strategies designed for members by Aon Hewitt’s global investment team. We have combined this with a well-researched fund range for people that wish to make their own investment decisions.
“Members of Bigblue Touch 4life can self-select from the range of funds but there are also flexible drawdown, target date funds for members who prefer to have these decisions made on their behalf.
“Our own research shows that nearly two-thirds of large pension schemes are actively considering how they can help their members access a drawdown solution, but many schemes are daunted by the potential risks. We think the risk of not offering members a preferred ‘At Retirement’ solution might be greater than not doing so - and members rightly expect support to help them retire successfully. We believe Bigblue Touch 4life can give trustees, employers and members the confidence they need.”
More than Half of Leading CHROs are Not Career HR Professionals
New Aon Research Reveals Evolving Role of HR, and Emerging Skills Needed to Lead HR 2020
LINCOLNSHIRE, September 9, 2015 – With five generations all in one workplace, the workforce of the future will look much different than it does today. As these changes occur, new research from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), shows that HR leaders are preparing in diverse ways to assume this challenging role. More than half of participating CHROs revealed they are not career HR professionals. Of these, approximately one third had no background in HR prior to assuming their current CHRO position.
Aon Hewitt’s study captured insights from 45 CHROs at leading global organizations. According to the study, the evolving needs of the business, the volatile economic environment, and the changing face of talent are shaping the selection of CHROs, with diversity in experience a key factor.
- 73 percent of the study participants have changed their industry at least once in their career.
- According to Aon, a change in industry leads to an increase in the velocity with which a CHRO aspirant progresses in their career. For example: Those who have never changed their industry had an average work experience of 27.5 years, and an average tenure of just four years as CHRO
- Those who have changed their industry more than three times had the highest average tenure as a CHRO, with seven years, and the lowest average work experience (23.3 years)
- 66 percent of study participants indicated they had prior Board exposure
- 84 percent highlighted executive compensation experience as a key requirement
- 24 percent took a rotation or assignment in a line role (outside of HR) to build their business and commercial acumen
- 67 percent have worked and lived abroad, and/or led global teams and initiatives
- 65 percent indicated “business knowledge” as a key competency they required, but it was also among the competencies for which they felt least prepared
“CHROs have become critical stakeholders in defining the strategy of a firm, and they are expected to tackle the HR challenges and evolving expectations of a dynamic workplace environment that will consist of constant change, calculated risk taking and evolving expectations from top stakeholders,” said Neil Shastri, leader, Global Insights & Innovation, Aon Hewitt.
“Those well-equipped to achieve the greatest success will have diverse skill sets, be adaptable and agile, and gain hands-on learning from working through real life situations and acquiring knowledge across disciplines and industries.”
Must Have Skills for CHROs
When participants were asked about some of the emerging capabilities that future CHROs will need to be successful, six key themes emerged:
- Data- and analytics-based decision making. Don’t focus on giving the right answers, but on asking the right questions.
- Being the architect and assessor of shifts in organizational culture. Make sure a company’s culture is moving in the right direction by ensuring leaders’ styles align with the cultural goals.
- Proactively mapping organization capability needs to the future strategy of the firm. Examine the gap between existing capabilities and the ones needed in the future.
- Playing the role of an internal and external talent scout. Build the critical ability of spotting pools of talent, using a mix of intuition and data and assessment backed insight.
- Understanding the Impact of technology. Be cognizant of the rapid progress in HR technology, particularly SaaS solutions, to improve HR processes and analytic capabilities.
- Asking organization-specific questions rather than following the herd. Realize how different practices can be best applied to their own organizational contexts.
“HR is used to helping other parts of the organization with succession planning and leadership development, but could improve in the area of developing its own leaders,” said Dave Kompare, partner, Aon Strategic Advisors & Transaction Solutions.
“To build a strong bench for the future, HR must work on creating an environment conducive to the growth of future CHROs from both within and outside the function. It must also look for ways to help CHROs of the future pick up critical experiences that matter in the CHRO position.”
About the Study
Aon’s inaugural Learning to Fly study was based on insights gathered from personal interviews with 45 CHROs around the globe about their journey into the CHRO position. The participants currently lead the HR function of organizations headquartered in the U.S., Europe, and Asia-Pacific, with a median work experience of 26 years. One-third of the companies represented in the report are listed on the Global Fortune 500. Collectively, these organizations represent USD 1.25 trillion in annual revenue, with 3.35 million full time employees.
Visit www.aon.com/NextGenCHRO for a full copy of Aon’s study results.
Insights from Aon Hewitt Best Employers – Singapore 2015 Country Report
Singapore, September 7, 2015 – The most recent research conducted in Singapore and Asia by Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON) reveals that Singapore CEOs continue to identify people issues as the most critical “business” challenge for their organisations.
As part of the Aon Hewitt Best Employers 2015 programme, the consulting firm interviewed more than 400 CEOs in Asia to understand key talent issues that are posing a risk to their organisations’ ability to succeed and how they intend to mitigate them. Consistent with the rest of Asia, Singapore organisations identified shortage in critical skills and rising salaries as the top people issues.
In the midst of the on-going talent war Best Employers, as identified in Aon Hewitt’s study, are able to outperform the market by achieving 29 percent higher income than market average, enjoy a 25 percent lower attrition rate and have filled 42 percent more job openings internally compared to market average. The “formula” for a Best Employer is dependent on its ability to generate high scores in employee engagement, a compelling employer brand, effective leadership and a high performance culture measured through 3 data sources: an employee opinion survey, evaluation of the company’s people practices and a CEO interview. In comparison to Best Employers, Singapore organisations are struggling to cover the distance between rhetoric and reality in these areas.
The gap between Rhetoric and Reality in Singapore organisations is manifested in all 4 pillars of the Best Employers study:
- High Employee Engagement: Career opportunities is the top driver of engagement across all generations. But only 54% of employees think they have good career opportunities at their organisations
- Compelling Employer Brand: 65% of organisations said they have a clearly defined employer brand. But only 15% have complete alignment between the CEO and HR definition of their employer brand
- Effective Leadership: Leaders say “our employees are our greatest assets” . But only 58%of employees believe their leaders treat them as their most valued asset
- High Performance Culture: 71% of CEOs say people managers have tools and resources to manage. But only 55% of people managers feel they are fully productive.
Examining the best and most innovative talent management practices of Best Employers provides key learnings for business leaders in Singapore today.
Best Employers display the following behaviours and practices:
- Tailor talent management practices to engage specific employee groups
- Put emphasis on total rewards, transparently linked to performance systems, to drive a high performance culture
- Meet talent supply with early identification of high potentials as well as people management and capability development programs
- Recognise high performers in relevant and memorable ways
- Understand that mature people practices improve employee perception and enable better delivery on the ground
- Define and deliver a unique and compelling Employee Value Proposition that is clearly delivering on its values and promise.
Details of the gaps in talent practices in regards to market best practices and employees’ expectations are outlined in the recently published Aon Hewitt Best Employers – Singapore 2015 Country Report. The full report is first available to Best Employers programme participants as part of the programme’s exclusive benefits and deliverables before being released more widely.
“For organisations that don’t make it to the Best Employers list, but are aspiring to become Best Employers, we want to reinforce that this is a journey. Becoming a Best Employer doesn’t happen overnight, said Gitansh Malik, Regional Manager, Best Employers Asia with Aon Hewitt. “It is possible for everyone to become a Best Employer, if you have articulated the destination you want to head to and have planned your journey wisely.”
The Aon Hewitt Best Employers Asia 2016 Study, is open for registration, please visit http://www.bestemployersasia.com
About Aon Best Employers Asia Pacific
Aon Hewitt’s 15 years of Best Employers research in Asia Pacific, incorporating insights from over 4,500 registered organisations, supports the striking evidence that a committed and productive workforce delivers stronger business results. Our research shows that Best Employers sustainably demonstrate a high level of Employee Engagement, a compelling Employer Brand, Effective Leadership and a High Performance Culture. For more information, please visit http://bestemployersasia.com
Largest increase from £1 billion+ schemes
LONDON, September 7, 2015 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has announced the findings of its annual Fiduciary Management Survey of UK pension schemes, which reveals that almost half the respondents now have a fiduciary manager to help them with increasingly complex investment decisions.
The survey, Aon Hewitt’s sixth and the largest and longest-running survey on the UK fiduciary management market, gathered the opinions of 230 pension schemes, with an estimated £181 billion of assets and representing around 10% of the defined benefit pension market in the UK. The survey covers 66 schemes which currently use fiduciary management services, with an estimated £60 billion of assets.
When asked whether they have a fiduciary management solution in place, 46% of the respondents answered positively. The adoption of fiduciary management has increased substantially over the last four years - only 18% of the respondents said they used fiduciary management when Aon Hewitt first asked this question in 2011.
Responses from the survey reveal that larger schemes are increasing their use of fiduciary management services with the strongest growth in this year’s survey coming from schemes with £1 billion or more in assets. 51% of the respondents within these schemes have now either full or partial fiduciary management, while in 2014 the figure was 22%.
Sion Cole, partner and head of European Distribution at Aon Hewitt, said: “It has been a common misconception that fiduciary management is used mainly by small schemes. This year’s survey shows that while this remains the case for full fiduciary management, we are now seeing strong growth in take-up from mid-sized and larger schemes on bespoke mandates.”
“Last year 22% of larger schemes used fiduciary management services and this year’s results show a significant uptake, proving that schemes are recognising the benefits of delegating the day-to-day decisions on the portfolio and the fact that they see value in the wider range of bespoke solutions available.”
Measuring success based on scheme’s own objectives As in 2014, the majority of respondents to the survey (69%) agreed that they would prefer to measure the success of their fiduciary provider based on the scheme’s specific investment objectives, rather than by using an industry-wide benchmark.
Sion Cole continued: “There are calls in the industry for a fiduciary performance league table of some sort. We are not against this concept but believe if poorly constructed it could be misleading. Fiduciary management is a bespoke solution that varies between providers and within providers. Each pension scheme is also unique in terms of its size, make-up, investment objectives and beliefs, for example. For a meaningful comparison to be made both the parameters of the solution and the pension scheme characteristics need to be the same, or very similar, to draw sensible conclusions.”
Key survey highlights:
Customer satisfaction with fiduciary management services remains high with 98% of respondents saying their overall experience is excellent, good or satisfactory
The main benefits of fiduciary management are cited as being the access to expertise as well as attention to risk and investments and ‘nimbleness’.
The main concerns continue being costs and the difficulty in differentiating between providers.
Schemes with assets of £500m or less are the most likely to opt for full fiduciary, while schemes with more than £1bn in assets are more likely to opt for a partial fiduciary management mandate.
58% of respondents would prefer to use a fiduciary provider linked to their existing actuary or investment consultant
74% of respondents would use face to face interactions to select their fiduciary provider. Selection processes continue to be used in combination, with 65% of these including beauty parades.
Aon Analysis Finds Most Workers Will Likely Need to Work Longer or Save More to Meet their Financial Needs in Retirement
LINCOLNSHIRE, Ill., September 1, 2015 /PRNewswire/ -- A new analysis from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), reveals that most workers will likely be working longer to save enough to maintain their standard of living in retirement.
Aon Hewitt's analysis of 77 large U.S. employers, representing 2.1 million employees, projects the average worker will need to save 11 times their final pay at retirement (age 65) to keep their preretirement lifestyle. Exact income replacement depends on the unique situation of each worker including age, income, anticipated retirement age and Social Security.
Aon Hewitt finds most workers are coming up short when it comes to preparing for retirement. Only one-in-five are on track to meet or exceed their needs in retirement at age 65. An additional 20 percent may be close to having reasonably adequate savings with some lifestyle adjustments. This leaves 60 percent of workers unable to afford to retire at age 65. Aon Hewitt projects that age 68 is the median age U.S. workers will be able to retire with sound financial security, while 16 percent are not expected to have enough to retire even by age 75.
"The benefits landscape has changed over time and U.S. workers are now accountable for a greater portion of their financial needs in retirement," said Rob Reiskytl, partner at Aon Hewitt. "Unfortunately, most are under-prepared. The most important thing they can do is to establish goals for the kind of retirement they want and determine a savings plan to meet those needs and desires. This might mean starting to save more now, delaying retirement by a few years, or making a conscious choice to retire with a lower living standard."
Aon Hewitt finds many workers are not planning enough for their long-term financial goals. A separate Aon Hewitt survey found that just over half of workers (54 percent) have estimated their retirement needs, determined savings requirements or forecasted how much income they'll need in retirement. Only 40 percent of workers have created a financial plan to achieve their retirement goals.
"Many employers are increasing their focus on financial wellness, offering education, tools and resources to help workers achieve their savings goals," explained Reiskytl. "Taking advantage of online tools such as budgeting and debt management programs and apps, professional investment advice and savings features like target date funds, automatic rebalancing and managed accounts, are all things that will help workers close the savings gap."
Schemes with poor covenants should reconsider their funding plans
LONDON, September 1, 2015 - Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has said that recent falls in equity prices and the continued low level of gilt yields will have painful implications for pension schemes – and particularly those with weaker employer covenants and those that have an actuarial valuation in progress.
Matthew Arends, partner at Aon Hewitt, said:
"World equity markets continue to be volatile following sharp falls in prices and most pension schemes will have seen a fall in asset values similar to other investors. Our figures indicate that the assets of pension schemes of FTSE 350 companies have lost approximately £30 billion since 1 April 2015. However, a pension scheme also needs to consider the value of its liabilities, which typically remains high due to stubbornly low gilt yields – we estimate the wind-up liabilities of FTSE 350 companies have increased by almost £15bn over the same period. The consequence is an unpleasant ballooning of their deficit in the past few weeks.
"We don’t generally advocate pension schemes making knee-jerk reactions to volatile markets but where a pension scheme is supported by a weak covenant, trustees will need quickly to take stock of increasing deficits and consider the viability of their funding plans. Pension schemes in the middle of an actuarial valuation also face a dilemma. In this situation, the current size of the scheme deficit is of increased relevance and there is a case for both trustees and employer taking stock of the new deficit situation before agreeing to a funding plan.”
Matthew Arends continued:
"Funding regulations permit the actuary to sign off the schedule of contributions based on the position either at the valuation date or at the date of signing. Ordinarily, pension schemes would be reluctant to change their policy on this point between valuations, but if a valuation is underway and the current deficit is substantially larger than it was at the valuation date, trustees and employers will need to be confident in the covenant strength if they are not going to take this into account. Additionally, the rising deficit may itself have caused a weakening of the employer's covenant."
John Belgrove, senior partner at Aon Hewitt, continued: "The Pensions Regulator has long been advocating considering both the contribution plan and the investment policy in the light of the employer's covenant strength. The recent market turmoil is one situation where the importance of assessing all key ingredients together is clear. For pension schemes with weaker employer covenants, the market price movements will be especially concerning, particularly as these schemes may need to take investment risk in order to pay off a deficit.
"The double effect of falling equity prices and lower yields will be particularly painful for under-hedged pension schemes and those with large equity holdings. We continue to advocate reviewing hedging levels and the degree of diversification to ensure they remain appropriate."