Consultant and insurance broker Aon brought its defined contribution members back from a group personal pension into the Aon Retirement Plan late last year so it can use defined benefit surplus as DC employer contributions. The firm will now improve the employer contribution.

Employees will see the employer contribution increase by 1 percentage point to 7.5% from 2026. Aon is also pledging to match employee contributions above the minimum, up to 1.5%. The higher pension contributions come amid a large solvency surplus in the scheme’s DB section, to which the employer has been given early access. Senior partner and trustee chair Jane Curtis previously told mallowstreet DC contributions were being made from the DB surplus. 
 

   

Aon reviews its pension provision on a regular basis to ensure it remains appropriate and consistent for all employees and to find ways of encouraging them to put more aside, Curtis has now said. 

 

“Surplus in Aon’s largest defined benefit scheme, the Aon Retirement Plan, is now being used to meet UK defined contribution employer contributions. [Doing] this required changes to the DC provision for Aon’s UK employees,” she said. 

 

UK employees were members of Aon’s group personal pension scheme, Bigblue Touch, for which Aegon acts as the insurer and administrator. The DC members were moved into a new trust-based arrangement, the Aon OnePlan, at the end of 2024, Curtis said.  

 

“The Aon OnePlan is a new DC fund in the Aon Retirement Plan with services provided by Aon’s DC adviser and solutions teams,” she explained, noting that Aon provides a bundled service to Aon OnePlan covering administration – outsourced to Aegon – along with investments and communications. 

DB surplus can currently be used to fund DC contributions, without incurring a tax charge of 25% for extracting surplus, if both schemes are in the same trust. With the Pensions Regulator recently finding that 82% of schemes are in surplus on a technical provisions basis, boasting a combined £207bn in DB surpluses, some employers have adapted their pensions strategies to take advantage of the current funding environment. More companies have either put on hold outsourcing their DC schemes or, like Aon, taken a previously outsourced scheme back into a hybrid trust. 

Schroders has recently said it will run its DB scheme on and use some of the current surplus to partly finance contributions to its DC section. The asset manager is not making any improvements to its DC offer, having cut this from a 16% non-contingent employer contribution with employee contribution matching up to 2%, to an 8% non-contingent contribution with matching up to 5% in February 2024. 

Last week, the government announced that it will legislate for DB surplus extraction, picking up proposals of the previous government. DB corporate schemes had so far been out of scope of large-scale pension reform proposals, which were focussed solely on DC and the Local Government Pension Scheme.