Aegon cuts pensions in move that sparks fury

UNIONS yesterday slammed a move by insurer Aegon UK to freeze its final-salary pension scheme and reduce the benefits of its general plan as it seeks to meet an £80 million cost cutting programme.

The Edinburgh-based firm revealed it would close its final-salary scheme to future accrual from 31 March 2013 as well reduce payments to its general pension plan (GPP) by calculating contributions on the basis of basic salary and excluding bonuses.

The move comes weeks after the life and pensions company announced it would cut a further 116 jobs, bringing total job losses to more than 1,000 since January 2010.

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Aegon UK, which is owned by its Dutch parent firm, said the move would bring it into line with other UK businesses that are switching from more generous defined benefit pensions to defined contribution schemes.

Adrian Grace, Aegon UK’s chief executive, insisted that the change would make the group’s pensions “equitable” after it shut its final-salary scheme to new entrants in 2003. More than half of its employees are now part of the GPP.

He said: “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.

“Running two different pension schemes also means we’re not rewarding employees on an equal basis, and we want to address this.”

Aegon added that it would “reward” its 1,396 final-salary pension scheme members with inclusion in its GPP in April 2013.

But Brian Linn, general secretary of Aegis the Union, branded the changes as a “devastating attack” on the firm’s employees at the demand of its owners in The Hague and that the union would “consider all options”.

Linn said: “We do not accept that these proposals will ‘reward all employees on an equitable basis’, as the company claims. The reality is they will dramatically reduce the pension provision for every single member of staff.”