Aegon UK set to close final salary scheme to future accrual

Aegon UK is planning to close its own employee defined benefit (DB) pension scheme to future accrual on 31 March 2013 and remove the link to final salary for calculating pension entitlement from that date.

The changes, which are due to be consulted on with employees and unions, are part of the organisation’s restructuring and cost saving programme.

Aegon UK has decided it is no longer commercially sustainable to keep the scheme, which has been closed to new members since 2003, open to future accrual and maintain a link to final salary.  

It has agreed with trustees that these changes should be made from 31 March 2013.

From 1 April 2013 Aegon UK will offer DB scheme members its group personal pension (GPP) scheme. It is also proposing that employer pension contributions are calculated using basic salary only, rather than salary plus fluctuating earnings such as bonuses and overtime.

Aegon UK said this would make employer pension contributions more affordable and predictable in the future, and ensure its pension provision is sustainable for the longer term and bring it more in line with its competitors.

Adrian Grace, chief executive of Aegon UK, said: “The financial risks in running a (DB) scheme are becoming ever greater and there is a growing trend for employers to move from DB to defined contribution (DC) pension arrangements. It is no longer commercially sustainable to keep our scheme open to future accrual and maintain the link to final salary.

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

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