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.