View more on these topics

Union slams Aviva’s final salary “betrayal”

The Unite union has slammed Aviva for “stabbing employees in the back” with its move to ditch its final salary staff pension schemes.

The insurer revealed yesterday that it was to launch a consultation with 7,600 Aviva and RAC staff over the closure of its final salary pension schemes, which have amassed a combined deficit of £3bn.

The Aviva staff scheme had already been closed to new joiners, while the RAC scheme is currently fully open. Under the latest proposals the RAC scheme would be closed to new entrants and both schemes would be closed to new contributions from existing members.

Under the proposals employees would be moved into the insurer’s money purchase scheme, which currently has 14,000 members, from April 2011.

Unite calculates that a typical member can expect to see the pension they earn in future reduced by a third and their overall career pension reduced by a fifth.

The union says the reduction in the pension paid during their retirement will be equivalent to the loss of three years of their current salary.

But yesterday, Aviva said it was both “inequitable and unsustainable” that currently two-thirds of the employee contributions it pays are going to fund the pensions of just one-third of its staff.

Its deficit has trebled in just four years from £1bn in 2006 to its current level of £3bn.

Unite national officer for finance Siobhan Endean says: ”Aviva remains a highly profitable company and what it has done today is stab hard-working staff in the back who could now lose thousands of pounds in pension benefits to live on during their retirement.

“It is a betrayal as employees regard a final salary scheme as deferred pay for years of loyal service.”

Unite officer for Aviva, Bernadette Fisher, has called for “meaningful talks” with the company.

She says “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.”

Aviva UK chief executive Mark Hodges said yesterday that the move would “protect the final salary pension benefits that employees have already built up”.

He said: “It is also crucial that whatever we do is equitable and sustainable for all UK employees, and the current pension arrangements are neither.” 

Other options that Unite says Aviva should consider include salary capping, reducing accrual rates, increasing the normal pension age, capping future increases in pensions and higher optional member contributions.  

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. Instead of blaming Aviva, Unite should be directing their ire at one Gordy Broon who since 1997 has single handedly destroyed the retirement aspirations of hundreds and thousands of private sector workers with his tax raid on pensions schemes. The total tax take so far I understand, just about equates to the actuarial losses of all final salary schemes.

  2. As an employee of over 10 years standing I was prevented from joining the f.s. scheme as it had already closed.

    Since then the company has been subsidising the scheme for the shrinking minority.

    Instead of attacking Aviva I’d suggest that Unite, of which I am a member, would have been better employed lobbying the Labour government to bring about long overdue pension reform.

  3. … I see the Unions have their head-up-their-arses again (cf British Airways)

    The reality check is that Final Salary OPS are dead-in-the-water – too costly to maintain – esp in this precarious economic situation UK plc finds itself.

    “It is a betrayal as employees regard a final salary scheme as deferred pay for years of loyal service” – don’t make me laugh!!

    Decent salaries and almost ‘jobs-for-life’ … sounds like the Public Sector, methinks!! What about those in the private sector, who don’t have the luxury of the gold-plated FS pension??

    In my experience, Avivia’s customer service/administration has been crap for years – where is the loyalty to their customers/clients??

  4. Victoria Mitchell 21st April 2010 at 11:04 am

    As so many other companies are closing their DB schemes why shouldn’t Aviva – leading by example rather than trying to protect, as one of the comments above says, the shrinking minority. Aviva could up it’s % contribution to the DC scheme once everyone is in it – then everyone benefits. DC schemes are the norm, this adjustment simply brings Aviva in line. The Union has to understand basic economics surely. What about all the DC scheme people who have put in years of loyal service? Aviva isn’t a local company for local people any longer, it’s a multinational and needs to be able to operate as such without the emotive knee jerk reaction to change.

  5. From where does Unite think the money necessary to plug a £3Bn solvency shortfall is going to come? These are hardly boom times for insurance companies, are they?

    That aside, I agree that the principal culprit in all this is Crash Gordon, and not just for his tax plunder on pension funds. It’s all the other changes as well, not least the savage and unreasonable restrictions on how companies must “manage” surpluses and make good solvency shortfalls.

    No company can maintain something as long term as a final salary pension scheme if people with no real understanding of them are forever interfering and imposing unreasonable stipulations.

    Still, never mind ~ the NEST scheme will sort everything out and we’ll all live happily ever after.

  6. Firstly,

    John

    Do stop winging about Mr Brown. If my memory serves me correctly it was Nigel Lawson of the Conservatives who started ripping the financial heart out of pensions. Furthermore, do not be under any illusions that the Conservatives would not have continued attacking pensions if they had remained in power, but of course they would most probably say……….we would not have done what Labour did. I am on the fence as to who I will be voting for, however, I do realise all parties tell us what we want to hear, but once in power the promises soon disappear.

    AVIVA

    Do AVIVA not want to rip out more money from their WP fund to make up for any shortfall in the final salary scheme as was done in 2008.

    Times On-line 23/03/08
    NORWICH UNION, Britain’s biggest insurer, has raided policyholders’ funds to the tune of nearly £300m to plug a hole in its pension fund and pay for past miss-selling.

    What did NU have to say!

    Norwich Union said that its use of the with-profits fund to pay for business expenses was within the rules…………….and here was I thinking the WPF belonged to the policy holder!

    Graham

  7. Correct me if I am wrong, but didn’t the Barber v GRE ruling decree that pensioins are deferred pay. If so, then this means a pay cut for the members. Also under the Thatcher Government firms were allowed to take contribution holidays if their schemes were deemed to be in surplus, so Graham is right – both blue and red Governments are to blame. I also agree that the public sector pensions are in serious need of reform. I say that even though I am most grateful that my wife is a member of one!

  8. When I was born in 1958 my life expectancy was 68 years, so if I’d engaged in some early planning I might expected a 3-year retirement at age 65. Now that I’m nearly 52 (29th April, cards and gifts very welcome!) my life expectancy has increased to 83, indicating an 18-year retirement from age 65 – SIX times what I might have expected.

    If I’d been in a final salary scheme (whether public or private) my contribution would have been no higher even though my benefits would be roughly six times greater (18 years instead of 3).

    No company and no government can afford this so expect a winter (or ten) of discontent coming to a high street near you, soon after the election. It does make me wonder why Brown is so desperate to win it!

  9. Manchester Cynic 21st April 2010 at 12:04 pm

    If Aviva want to be equitable with their pension expenditure per member, DC and DB, then surely they should be increasing the employer contribution to the DC scheme by a third now that they’re switching everyone into it? The problem with the closure of final salary schemes is that they are inevitably replaced (if at all) by DC schemes with a greatly reduced employer contribution, thus drastically reducing the potential future accrual of benefits as well as removing the final salary “guarantee”. Various assaults on final salary scheme funding over the years (reducing potential “surpluses”, increasing liabilities and hanging them like a millstone round the necks of those employers that actually pay into them) have made them deeply unattractive to many, but DC doesn’t have to be a dirty word.

  10. And so the demise of DB schemes continues.

    I would normally be the last person to defend Mr Brown, however the abolition of ACT credits in 1997 is not the main culprit here.

    Successive legislation passed to protect the interests of employees of DB schemes, and a general increase in longevity are the two nails in this particular coffin.

    But It is not beyond the means of man to find a third way to ensure DB schemes don’t die off completely.

    How about “risk sharing” between employer, employee and Government? Of course this could be done if the political will was there. Sadly it isn’t at the moment.

    The UK has more money invested in private pension schemes then the rest of the EEC counties put together.

    Lets have a new government with some new thinking.

    This country still has some of the brightest talent in the world, For everyones sake lets hope a solution can be found to provide a decent fair private sector pension for all.

  11. ok the scheme has been woefully mismanaged, I don’t understand who a company like aviva can be trusted with anyone’s money if it cant even provide for its staff. Other major employers have closed their schemes to new members like aviva and they have made it work. Someone must have seriously taken their eye of this one, it’s a disgrace.

    The fundamental cause of all of these final salary schemes dying their death was the generous payment holidays the 80s conservative governments allowed the schemes to take when times were good, this was madness, financial incompetence and no one has ever been made to pay for the damage it has done to 1000s

    While labour are totally crap this is the lasting memory that shows the rich poor divide preferred by the tories. It was true then and it is true now beware David “eggy “ Cameron, fool me once shame on you, fool me twice shame on me, (as George w never managed to properly say!)

  12. … I see the Unions have their head-up-their-arses again (cf British Airways)

    The reality check is that Final Salary OPS are dead-in-the-water – too costly to maintain – esp in this precarious economic situation UK plc finds itself.

    “It is a betrayal as employees regard a final salary scheme as deferred pay for years of loyal service” – don’t make me laugh!!

    Decent salaries and almost ‘jobs-for-life’ … sounds like the Public Sector, methinks!! What about those in the private sector, who don’t have the luxury of the gold-plated FS pension??

    In my experience, Avivia’s customer service/administration has been crap for years – where is the loyalty to their customers/clients??

  13. I can’t believe some of the comments here. Whatever the affordability, to Aviva, they made a promise to these people. Am I to assume, then, that if all of you that think it is OK for Aviva to break their promises then you would also do the same to anyone you know? Is that the sort of society we want to live in?
    The excuse that Aviva can’t afford it (because they have made mistakes in their judgement and, yes, I appreciate due to some outside circumstances as well) is not good enough. That is the sort of thing any absent father could say to get out of his responsibilities.

    By all means do not allow new members into these schemes, because they know what they will be getting when they go in, but don’t say it’s OK for the wealthy to stick it to those they have promised they would look after. That is just immoral.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com