UK – AXA UK faces strong union opposition after announcing it will make members of its non-contributory pension scheme contribute up to five percent of their salary.
AXA UK spokesman Phil Hickley cited the economic conditions of the last few years, greater life expectancy and extra costs involved in complying with regulations as the reasons behind the decision to alter the scheme. Current non-contributing members will have to hand over 2.5% of their salary as of October 2003, which will be increased to five percent in October 2004.
Directors and senior executives who already contribute three percent will see their levels raise to five percent in October.
AXA itself will be adding an extra seven million pounds to the pensions pot this year, which Hickley said would be significantly increased over the next two years.
The decision to force members of the final salary scheme to contribute has been met with outrage by employees and unions, as it is viewed essentially as a pay cut. AXA’s retort is that it is committed to offering a final salary scheme and does not wish to close it to new members.
Asked whether current members may prefer to continue not contributing - in line with the pay packages they were originally promised - and have new employees join a defined contribution scheme instead, Hickley said that that was perhaps “a little selfish” way of doing it. He reiterated AXA’s commitment to retaining a final salary scheme.
AXA also intends to raise its retirement age to 65 – but not for directors and senior executives who will be able to retire at 60. The increase will only affect service from October 2003 onwards.
The inconsistency of the increase in retirement age across staff has also outraged members, but Hickley insists that “the different package reflects the different employment markets”.
Unions have made it clear that they will not take the news lying down. Says Jerry Pickford, negotiating officer at finance union Unifi: “Despite what AXA may claim, they did not ‘consult’ in the true sense of the word with the unions and members about the changes. Rather we were just told. They are refusing to negotiate, but if taking 2.5% out of your pay-packet is not negotiable then what is?”
“Members have been asking the union to ballot for action, which we intend to do unless AXA enter into serious meaningful negotiations – not consultations – with us over the changes,” added Pickford.
AXA has around 5,000 active members in the UK. It is still unclear whether members of the final salary scheme employed with AXA Investment Managers will be affected.
AXA’s UK final salary scheme had a deficit of 429 million pounds under the FRS17 accounting standard as at the end of December 2002.