Insurance giant Aviva has announced plans to close its final salary pension scheme to existing members.
The company, which closed its pension scheme to new entrants nine years ago, said it will enter into consultation with staff in June about closing the scheme to all existing members in April 2011, reports the Daily Telegraph.
Aviva’s pension fund includes workers from RAC, which it acquired in 2005, and has a current shortfall of about £3bn.
In total, 7,600 employees will be transferred to a less lucrative “money purchase arrangement” – a form of defined contribution pension – if the proposals are implemented.
Mark Hodges, Aviva’s UK chief executive, said the move would enable the company to “protect the final salary pension benefits that employees have already built up”.
“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. “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.”
Bernadette Fisher, officer at trade union Unite, said: “As the UK’s biggest pension provider, it is quite shocking that Aviva should be looking to plunge thousands of its own staff into pensions’ insecurity at this difficult time.
“Aviva made profits of more than £1.1bn last year, and has more than enough resources to maintain the framework of a final salary pension. Closure is the most drastic solution possible to address the size of the scheme’s deficit.”
A CBI/Watson Wyatt survey recently revealed that 80% of directors in private sector employers believe most final salary schemes will be closed to existing members over the next few years, and replaced by defined contribution schemes.