Consultancy Aon is cutting its employer pension contributions by up to half to reduce costs and avoid job losses or putting employees on shorter working weeks.
Under the firm’s current arrangements, the standard employer contribution rises according to age, with people over 50 getting 12 per cent. Under the proposed arrangements, the contribution will be cut to a maximum rate of 6 per cent for all ages.
Altmann feels this will set a precedent for employers to cut contributions to pension schemes and that it heralds problems for future pensioners.
She says: “This has huge significance as Aon advises other employers on their pension arrangements. It signals a loss of faith in pensions and a preference for cutting pensions over other forms of cost-cutting. Aon closed its final-salary scheme in 1999 and cut contributions by moving new workers into money-purchase arrangements. Now it wants to cut contributions again. Final-salary scheme employer contributions are around 20 per cent, money-purchase contributions are under 10 per cent and now Aon is cutting back to 6 per cent for everyone as standard.”
Aon UK CEO Peter Harmer 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 on an employee’s age. The more an employee contributes, the more Aon will match, up to specified levels.”
Aviva also says it will be ending its free pension for 16,000 staff and will be asking all members to start contributing from July. The members of the firm’s defined-contribution scheme have not had to make any contributions but from July they will have to pay 1 per cent into the scheme.