Aegon forced back to talks as £2.5m pay freeze rejected

• Otto Thoresen: driving cost-cutting measures Picture: TSPL

The company wanted a deal as part of its 80 million-a-year cost cuts programme, which involves a major restructuring of its UK operations.

The results of a ballot showed that members of Aegis voted in favour of accepting the freeze while Unite was against.

Aegon, which has 2,400 staff in Scotland, proposed not to award an increase in pay to either staff or management in January. Based on last year's staff pay settlement of 2 per cent, the company said it would achieve a saving of about 2.5m next year.

It is standard practice each year to negotiate proposed pay awards with Aegis and Unite, the trade unions that represent staff. An Aegon spokeswoman said: "We are pleased that Aegis members, who represent the majority of our staff, including the Edinburgh head office, have voted to support this proposal. We would like to thank them for their support. We are pleased that staff recognise the potential benefit of difficult measures like this to ensure the success of Aegon UK in the long term.

"This proposal was not one that was taken lightly and we believe it would contribute a cost saving of around 2.5m towards our cost reduction targets, and help with our commitment to do everything we can to minimise compulsory redundancies.

"We will be sitting down with both unions early next week to discuss this outcome and what next steps will be."

Aegon announced its cost-cuting plans on 22 June as it looks to reduce operating costs across the business by 25 per cent by the end of next year. As part of the programme, Aegon looked at all payroll and non-payroll expenditure.

The company is expected to axe 600 jobs as part of the restructuring programme. Last month, the group sold its third-party pensions administration business to corporate consultants Goddard Perry.

In September it unveiled plans to close the business, which employs 82 staff in Daresbury, Cheshire.

But following the announcement, Goddard Perry approached Aegon with an interest in buying the business and terms were agreed.

Aegon chief executive Otto Thoresen has already ordered chief operating officer Adrian Grace to instigate a number of measures to restructure the business. These have already included the closure of its group risk business, withdrawal from the bulk annuities market and the reorganisation of the company's UK sales division, which led to 106 job losses.

The group wants to focus on life insurance, pensions and asset management in order to improve earnings growth, cash flow generation and return on capital.

Thoresen warned that "hard decisions" had to be taken on cost cutting despite the firm swinging back to the black in the third quarter.

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