Today we have told our UK employees in Aviva and RAC that we are to enter into consultation with them regarding proposed changes to our staff pension arrangements, in light of the future funding requirements, and our desire to provide a sustainable and competitive pension for our employees.
Today we have told our UK employees in Aviva and RAC that we are to enter into consultation with them regarding proposed changes to our staff pension arrangements, in light of the future funding requirements, and our desire to provide a sustainable and competitive pension for our employees.
Our proposal is that we protect all of the final salary benefits that employees have already built up. We will then offer all UK staff money purchase arrangements with effect from 1 April 2011. There are no changes for retired and deferred members.
Currently around 14,000 UK employees within Aviva and RAC are members of the money purchase sections of our pension schemes and approximately 7,600 employees have final salary arrangements.
Our proposal would ensure we have a unified approach to pensions which gives all UK employees access to a competitive staff pension scheme and certainty about their future pension provision. It will also help to reduce the potential financial risk and volatility created by future funding requirements for the pension schemes.
Together the UK and RAC final salary schemes take two thirds of Aviva’s contributions to UK staff pension arrangements - yet only one third of our UK staff have the final salary benefit, which we consider both inequitable and unsustainable.
We've begun discussions with the Trustees of our final salary schemes and representative bodies on our proposed changes to the pension schemes, and a 90-day consultation process is expected to begin in June 2010.
Mark Hodges, UK chief executive, Aviva, commented: “Our proposal would enable us to protect the final salary pension benefits that employees have already built up. It would provide a competitive alternative for them and simultaneously reduce the volatile impact of the final salary pension deficit on our business in the long-term.
“It’s also crucial that whatever we do is equitable and sustainable for all UK employees, and the current pension arrangements are neither. 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.
“We’ll continue to provide our employees with first-class, competitive pension scheme arrangements, and support them with financial education and advice to enable them to plan for their retirement.”
The Aviva and RAC final salary pension arrangements have a combined deficit of around £3 billion – in March 2006, for example, this was approximately £1 billion. Aviva is in discussions with the pension Trustees regarding long-term funding plans to eliminate the deficits.
Aviva pension arrangements:
- 70% of Aviva’s 19,500 UK employees are members of the money purchase section of Aviva’s Staff Pension Scheme (employees can contribute between 2 and 8% of salary and Aviva will contribute between 8 and 14%, depending on the employee’s chosen level of contribution).
- The remaining employees are members of legacy final salary pension schemes, which are no longer open to new joiners.
RAC pension arrangements:
- Of RAC’s 4,100 employees, 2,000 people are members of RAC’s final salary pension scheme which is currently open to new entrants.
- The remaining employees have chosen not to join the RAC final salary arrangement.
- Because our proposal would introduce a lower minimum employee contribution for the money purchase arrangement than the minimum employee contribution required for the final salary arrangement, it would make access to a competitive employee pension more affordable for the large number of RAC employees who have not previously joined the company arrangements.
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Media enquiries:
Sue Winston, head of group media relations
+44 (0)20 7662 8221
Hayley Stimpson, external affairs director
+44 (0)20 7662 7544
Andrew Reid, head of group media relations
+44 (0)20 7662 3131
Vanessa Rhodes, senior group media relations manager
+44 (0)20 7662 2482
James Murgatroyd/Conor McClafferty, Finsbury
+44 (0)20 7251 3801