Insurance group Zurich has begun consulting around 7,200 staff over the closure of its defined benefit (DB) schemes and changes to the defined contribution (DC) offering.
The company said it reassessed its offering after rising longevity and falling interest rates increased its funding shortfall, and that it aimed to shift all DB members to a new DC vehicle by July 2015.
The latest Purple Book, published by the Pension Protection Fund (PPF), showed the proportion of UK DB schemes closed to future accrual rose from 21% in 2010 to 32% in 2014.
Zurich operates two DB schemes, one for its core business that closed to new members in 2007, and one for subsidiary Endsleigh, which closed in 2001.
Combined, the schemes have a deficit of £648m (€829m) from around £4.7bn in assets.
The company will close the DB schemes to future accrual on 30 June 2015, with all members, including those currently only accruing DC benefits, moving to a new 12% non-contributory DC scheme.
Chief executive of Zurich UK Life Gary Shaughnessy said the company was “sensitive” to the impact on staff, and that the proposals were equitable in nature.
“We simply cannot ignore the impact on the long-term sustainability of our UK business of the cost of funding an open defined benefit pension scheme,” he said.
“This is about looking ahead, recognising that the current arrangements are not sustainable, and acting now to ensure our future arrangements for all our employees are.”
In other news, the PPF 7800 Index, which calculates the funding level of more than 6,000 UK corporate schemes, showed the deficit increased by more than £20bn to £165bn over the month of October.
Calculating funding on an s179 basis, which calculates schemes’ ability to provide PPF-level benefits, the lifeboat fund said the funding ratio among schemes fell by 1.3 percentage points to 87.9%.
Assets within the scheme increased by 1.1% to £1.2bn, but liabilities also rose by 2.5% to £1.36bn.
Over 12 months to the end of October, funding ratios have fallen by 7.9 percentage points as liabilities rose by 15.7% and assets increased by 6.2%.
The PPF said the main cause for this month’s deficit increase was a 12-basis-point fall in the yield of 15-year UK Gilts, while the FTSE-All Share, a prime index for assets, fell 0.9%.