Aegon has unveiled a plan to close its DB scheme to future accrual and reduce DC contributions, in a move that has been blasted by union Aegis as a ’devastating attack’ on loyal staff.
The DB scheme, which has been closed to new members since 31 March 2003, will close to future accrual from March 2013. The link to final salary for calculating pension entitlement will also be cut from that date.
The provider is also cutting DC contributions, linking employer contributions to basic salary only, rather than salary plus fluctuating earnings such as bonuses and overtime. The changes to DC contributions will be introduced from April 2012. More than half of staff are currently in the GPP option.
The cuts are part of Aegon’s long-term restructuring programme. Aegon says it is no longer commercially sustainable to keep the scheme open to future accrual and maintain the link to final salary for calculating pension.
The provider will begin a 60-day consultation period with its employees, and with its unions, Aegis and Unite, on 14 November 2011.
Aegon UK chief executive Adrian Grace says: “The financial risks in running a defined benefit scheme are becoming ever greater and there is a growing trend for employers to move from defined benefit to defined contribution pension arrangements. It’s no longer commercially sustainable to keep our scheme open to future accrual and maintain the link to final salary.
“Running two different pension schemes also means we’re not rewarding employees on an equal basis, and we want to address this. Our aim is to move to pension provision that rewards our staff on an equitable basis and is sustainable for the future.”
Brian Linn, general secretary of Aegis the Union, states: “This is a devastating attack on the people who have loyally supported Aegon through a turbulent year as the company restructures to meet the demands of its Dutch shareholder. For a pension provider to inflict a blow like this on its own people has shocked everyone to the core.
“We do not accept that these proposals will “reward all employees on an equitable basis”, as the company claim. The reality is they will dramatically reduce the pension provision for every single member of staff. We are utterly opposed to these proposals and will consider all options available to us in the fight to save our members’ pensions.”