Aon staff pension cut ‘next stage of employer withdrawal’ – Altmann

Aon is slashing contributions to the pensions of its employees who do not choose to make matching payments, a move that has been described as marking the next stage in employers\' withdrawal from pensions.

The broker and consultancy had previously paid between 6 and 12 per cent into schemes, depending on the age of the employee, with staff paying just 2 per cent. In future, the standard contribution will be limited to 6 per cent for staff contributing 2 per cent, but staff will be able to pay in a further 6 per cent and see it matched by Aon.

Pensions consultant Dr Ros Altmann says Aon’s move is significant because as a pensions consultancy, other employers will follow its lead.

Aon closed its final salary scheme to new members in 1999 and to existing members in 2007.

Peter Harmer, chief executive of Aon UK says: “Our proposal involves moving to a lower standard employer contribution, but supporting this with an offer to match contributions up to a certain level, depending upon an employee’s age group.

“This approach recognises that employees want to retain their pay to allow them to make choices. By offering a lower standard contribution while offering matched contributions, we are seeking to reduce fixed costs whilst saying to employees who regard saving into a pension as a priority, “If your retirement provision is important to you and you are prepared to invest in it, then we will back you and invest in it, too”.

TUC general secretary Brendan Barber says: “This is a triple pensions whammy. Staff first lost their salary related scheme, next saw their pension pots fall as shares crashed and now face what is in effect a choice between a salary cut or a further pension cut.

“The worry will now be that other employers take advantage of the ease in which defined contribution pension schemes can be cut.”

Altmann says: “Today’s announcement looks like the start of the next phase of employer withdrawal from pension provision. In fact, Government policy is encouraging the trend still further. From 2012, its proposed ‘personal accounts’ will only require employers to contribute 3 per cent. I have consistently warned about the ‘levelling down’ this will entail, as employers use the opportunity to cut pension contributions to the minimum ‘official’ 3 per cent level.

The result will be millions more pensioners in poverty, which will undermine future economic growth and leave a legacy of misery for new retirees.”