Aviva Market Data

Aviva, Britain's biggest insurer, has scrapped free pensions for almost 16,000 staff, The Times has learnt.

The owner of Norwich Union has also increased the amount that it expects the thousands of members of its final-salary scheme to contribute.

The 15,900 members of Aviva's defined contribution pension scheme have not had to make any contributions until now, but, from July, they will have to pay at least 1 per cent of their salary until next April and 2 per cent after that.

In return, Aviva will commit to increase its maximum contribution to the pension scheme, the retirement payout of which is based on the performance of the stock market, from 12 per cent to 14 per cent.

Only staff who contribute the maximum 8 per cent of salary to the scheme each year will trigger the biggest contribution from their employer. The new terms will apply across the group.

Aviva is also asking the 7,249 members of its final-salary pension scheme to increase their contributions or consider leaving the fund. The insurer said that the increased contributions, from 5 per cent to 10 per cent of salary, over two years would mean that Aviva could maintain its retirement commitment.

Staff in the defined benefit pension scheme have the options of increasing their contributions to 6 per cent of salary and take a lower pension or leave the fund.

Aviva said that it was imposing contributions on staff to encourage them to save and emphasised that it would not be cutting the amount that it paid into the scheme.

Aviva's revised pension arrangements come a day after Aon Limited, a subsidiary of the American insurance group and one of Britain's biggest pension advisers, said that it would cut contributions to its scheme by up to half.

Companies have been shutting costly final-salary pension schemes to new joiners for years. However, Aon is the first big British company to reduce the amount that it contributes to its defined contributions scheme.

The move, driven by an effort to save costs, is expected to spark a rash of similar moves by cash-strapped companies. One FTSE 100 chief executive, whose company operates final- salary and money-purchase schemes, said: “Every company, without exception, is looking at how they can reduce expenses. Companies are not going to keep up their contributions at the current rate for much longer.”

John Ralfe, an independent pension consultant, said that it was the latest example of “white-collar workers feeling the pinch”.

“There is now a greater supply of workers out there, but much lower demand for them from firms, so less of a need for attractive remuneration packages,” he said.

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