Aviva in talks to shut final salary pension schemes

LONDON: Aviva, Britain's No. 2 insurer, has opened talks with staff about closing its final salary pension schemes, which offer staff the most secure form of retirement income.

Aviva wants to migrate its final salary schemes' 7,600 members towards alternative money purchase schemes in April next year, although they would hold onto the final salary benefits they have built up.

Aviva said the change would harmonise the pension arrangements it offers its 19,500 British employees, 70 per cent of whom belong to money-purchase schemes.

It would also remove the risks associated with fluctuating funding requirements for the final salary schemes, so called because they pay retirees a guaranteed proportion of their final salary irrespective of the pension fund's investment performance.

The retirement income generated by money-purchase plans, in contrast, depends on the pension fund's performance, meaning investment risk is borne by the employee. Aviva's final salary schemes have a combined deficit of 3 billion pounds ($4.8 billion), and absorb two third's of the company's UK pension contributions, the company said.