Aviva and RAC to close final salary schemes

Aviva has confirmed plans to close both the Aviva and RAC final salary schemes to future accruals.

The 7,600 employees affected will be consulted on proposals to switch to the firms staff money purchase arrangement from April 1, 2011. There are no changes for retired and deferred members.

Aviva UK chief executive Mark Hodges says the insurer would continue to provide sustainable benefits to its members - despite the Aviva and RAC schemes overseeing combined deficits of £3bn.

He says: "Our proposal would enable us to protect the final salary pension benefits that employees have already built up. It would provide a competitive alternative for them and simultaneously reduce the volatile impact of the final salary pension deficit on our business in the long-term.

"It's also crucial that whatever we do is equitable and sustainable for all UK employees, and the current pension arrangements are neither. Our proposals are in keeping with the continuing trend for companies to move to money purchase schemes - these schemes are now the norm, rather than the exception."

He added: "We'll continue to provide our employees with first-class, competitive pension scheme arrangements, and support them with financial education and advice to enable them to plan for their retirement."

The 90 day consultation period is expected to begin in June.

Aviva pension arrangements:

70% of Aviva's 19,500 UK employees are members of the money purchase section of Aviva's Staff Pension Scheme (employees can contribute between 2 and 8% of salary and Aviva will contribute between 8 and 14%, depending on the employee's chosen level of contribution).

The remaining employees are members of legacy final salary pension schemes, which are no longer open to new joiners.

RAC pension arrangements:

Of RAC's 4,100 employees, 2,000 people are members of RAC's final salary pension scheme which is currently open to new entrants.

The remaining employees have chosen not to join the RAC final salary arrangement.