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Axa S.A. is proposing to freeze its £3.28 billion ($5.08 billion) U.K. defined benefit pension fund, which has been closed to new employees members since 2003, according to a company spokeswoman.
As required by U.K. regulations, Axa is entering a consultation period with employees in May and June, and a final decision will be made in July, according to a separate letter sent to employees. “People are living longer, investment returns are weaker and the cost of providing pensions is increasing rapidly,” according to the letter sent to employees in February. “As well as the ongoing costs of funding benefits, the company is responsible for repaying the current deficit in the DB section of over £1 billion.”
The Axa Group UK Pension Scheme, London, reported a deficit of £1.04 billion as of March 31, 2012, mainly because of an increase in pension liabilities and longevity assumptions, according to the latest annual report for the year ended March 31, 2012. As a result, a recovery plan was implemented in which Axa would contribute an additional £77 million annually starting this year and gradually increasing to £137 million annually by 2022 to help close the gap.
In an e-mail, the spokeswoman added: “Like many other companies before us, we are now proposing that the scheme be closed, pending a further 60 days of consultation. … This allows us to harmonize pension arrangements in a fairer way across our employee base and ensure that all of our employees have access to long-term pension provision.”
Thao Hua writes for Pensions & Investments, a sister publication of Business Insurance.