In a sign of the times UK insurer
Aviva has taken the first step towards closure of its Aviva and RAC
final salary pension schemes to accruals from 1 April 2011. The
final outcome of the insurer’s proposal is subject to a 90-day
consultation with representatives of the 7,600 scheme members
involved.
According to Aviva, the UK and RAC
final salary schemes take two-thirds of Aviva’s contributions to UK
staff pension arrangements, yet only one-third of the insurer’s UK
workforce of 21,600 have the final salary benefit.
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The insurer noted that it considers
the present arrangement as “inequitable and unsustainable.” More
so, in view of the combined current deficit of the final salary
schemes of £3bn ($4.6bn) which is three times higher than it was
four years ago.
“Our proposal would enable us to
protect the final salary pension benefits that employees have
already built up,” commented Aviva UK chief executive Mark
Hodges.
If the proposal goes ahead, members
of the final salary schemes will fall in line with other staff
members who have access to a Aviva’s defined contribution (DC)
scheme. Under the DC scheme employees contribute between 2% and 8%
of salary and Aviva contributes between 8% and 14%, depending on
the employee’s contribution level.
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