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The Actuary The magazine of the Institute & Faculty of Actuaries

Beware of surpluses

Just as the long winter suddenly metamorphosed into summer, so an enterprising pension consultant found something other than deficits and black holes for employers to worry about. In May, speaking at a pension fund strategies conference in London, Ian McKinlay, Aon’s investment consulting head, warned delegates that companies are being forced to plough money into pension funds at a time when interest rates are low and liabilities are inflated.

May’s issue of Aon’s Intouch Opinion newsletter focuses on the potential risks of pension surplus. It advises its clients that with a more prudent funding regime now in place, the risk of creating future surplus is now very real and because pension funds are ring-fenced it means that surplus funds are essentially trapped cash. Aon Consulting is calling for employers to act now and adopt contingent funding and investment strategies that will allow them to invest the money in their businesses.