Industry feeling pressure on pensions
Insurance workers’ pensions are likely to be overhauled as Norwich Union follows Aon’s lead in asking staff to pay more from their salaries to fund their retirement, writes Ellen Bennett.
This week, it emerged that Aviva, NU’s parent company, has abolished contribution-free pensions. Currently, employees receive 8% of their salary with no minimum contribution. From July, they will have to pay a minimum contribution of 1% to qualify, rising to 2% in April next year.
If they pay more, they will receive more, rising to a maximum of a 14% contribution from Aviva for an employee contributing 8%. A spokesman said: “We are proposing that everyone makes a contribution to increase the likelihood of people saving for their retirement.”
Last week, Aon announced that it was cutting its standard contribution to employees’ pensions from 12 to 6%, but offered to match employees’ contributions up to a specified threshold, depending on their age.
Aon’s dual role as a broker and a pensions consultant has sparked speculation that it would advise its clients to cut pensions.
Paul McGlone, propositions director of Aon Consulting, denied this, but said many companies would have to consider cutting pensions as one of a range of measures.
He insisted payments could be put back up in better economic times. “There is no way any company’s pension arrangements will look the same in 20 years’ time as they do today.”
Other brokers and insurers contacted by Insurance Times acknowledged pressure on pension pots. A Willis spokesman said: “Willis started managing its retirement plan cost and benefits several years ago, and the recent changes made by some of our competitors only bring them more closely into line with our existing defined contribution plan. Obviously we review our benefits. This is not only about cost but is directed at moving towards a more flexible benefit environment for our associates.”
An RSA spokesman said the insurer had no current plans to change its pension arrangements.