Aon-Hewitt merger on track for DC growth

Consultants believe the growth of the unbundled DC market in the UK will drive smaller EBCs out, as economies of scale for bargaining down fund fees become more important.

Employers with unbundled schemes are increasingly buying directly, such as FTSE 100 technology provider CSC’s decision to become the first scheme on Scottish Widows’ benefits platform, without using an EBC to broker the deal (see page 1).

If this process becomes the norm in Britain, as it has in the US and Australia, EBCs will need scale to attract the remaining trustee-based schemes, which are more likely to retain their services as fund buyers.

Hewitt Associates will be absorbed into the Aon Consultancy business, becoming Aon Hewitt from November.

The new company will be a subsidiary of Aon Corporation, but will be headed by current Hewitt chief executive Russ Fradin.

Fradin wrote to staff on Monday, saying: “We will have a strong global organisation and offer an even broader spectrum of consulting and outsourcing services to our clients, looking to address an increasingly complex set of challenges.”

Aon Corporation chief executive Greg Case said: “As we continue to grow our business, this merger will give us a broader portfolio of products and services focused on what we believe are two of the most important topics in the global economy today – risk and people.”

While nothing has been said about job losses, some back office rationalisation is expected.

The move follows similar global and UK-centred mergers and acquisitions, including Towers Perrin and Watson Wyatt, and Jardine Lloyd Thompson and HSBC Actuaries and Consultants.