UK Insurance Giant to Close Pension Schemes

The Guardian reports that the firm, which also owns the RAC motoring group, said it would begin a consultation in June with a view to closing its final salary pensions to both new and existing members from April 1, 2011. It said that since March 2006 the combined deficit on the Aviva and RAC schemes had risen from £1bn to £3bn, and it planned to stop offering a guaranteed final salary pay out “in light of the future funding requirements, and our desire to provide a sustainable and competitive pension for our employees,” according to the news report.  

The insurer closed its final salary scheme to new Aviva employees nine years ago, but has continued to offer it to RAC workers. In total, around 7,600 UK employees are members, while 14,000 have joined the firm’s money purchase scheme.  

Aviva said that while only a third of staff benefited from its final salary scheme, it accounted for two-thirds of its contributions to UK staff pension arrangements, a position it considered “both inequitable and unsustainable,” the news report said.  

Mark Hodges, UK chief executive at Aviva, said closing the scheme would “reduce the volatile impact” of the deficit on the business. “It is also crucial that whatever we do is equitable and sustainable for all UK employees, and the current pension arrangements are neither.”  

He added that: “Our proposals are in keeping with the continuing trend for companies to move to money purchase schemes – these schemes are now the norm rather than the exception.”