Aon U.K. Proposes Pension Cutbacks

A Business Insurance news report said the company has been meeting with employees about the proposal to reduce its employer pension contribution to 6% along with an offer to match employee contributions up to a certain level depending on the employee’s age.

Business Insurance said Aon’s current standard employer contribution for 20-something employees is 6% of salary with a minimum employee contribution of 2% of salary, while it contributes 8% of salary if the employee contributes 2% for 30-somethings. For employees in their 40s, Aon’s standard contribution is 10% of salary when employees contribute 2% and for employees in their 50s and older, Aon’s standard contribution is 12% when employees pay in 2%.

Under the proposed new arrangement:

• employees in their 20s and 30s would be asked to make a minimum contribution of 2% of salary and would receive the standard employer contribution of 6%. The company also would match the 2% contribution.
• employees in their 40s would be required to make a minimum contribution of 2% of salary and would receive the standard employer contribution of 6%, and Aon would match employee contributions up to 4% of salary.
• for staff of 50 years of age and older, Aon would require a 2% minimum employee contribution, pay the standard employer contribution of 6% and match employee contributions up to 6% of salary.

“In order to protect our business in challenging conditions and to ensure we emerge from the recession strong and successful, no stone is being unturned during 2009 to drive out further cost and to achieve greater efficiencies. The increasing cost of pension provision is one of those costs,” Aon said in a statement.

Meanwhile, Unite, Britain’s biggest union, warned Wednesday that it will not tolerate employers who attempt to use the sluggish economy to cut pensions.

“Aon’s announcement has put us on standby and we will be keeping a careful eye on employers who may now try to use the credit crunch as a cover to permanently cut pension contributions,” said Unite’s joint general secretary Derek Simpson, in a statement. “We will not stand idly by and allow the herd instinct to take effect.”