Aon has called on the Government to re-consider the implementation of its indexation promises in order to help alleviate the pension burden on some of the country's largest employers.

The consultancy firm wants to see a change to legislation so that deflation can be offset against future inflation when increasing pensions in payment, as they are when between leaving and payment.

The plea comes after the Aon200 Index recorded a further £16bn deficit being added to the top 200 privately sponsored schemes in the UK in February, bringing the total deficit to £45bn by the end of the month.

With little signs of recovery in the investment markets, Aon is arguing that changes to scheme benefits must be looked at in an effort to lessen their impact.

"Flexibility over benefit structures is needed to allow employers to deal with their defined benefit pension promises," said Sarah Abraham, actuary and consultant at Aon Consulting. "The current rules around pension increases were designed at a time when deflation was not a consideration.

"Although increases to deferred members allow negative inflation to offset positive inflation, increases to pensions in payment do not have this flexibility. We believe that to review the rules at this time is both a rational and proportionate response."

- Pensions Age March 2009

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