The insurer, Aon UK has confirmed it intends reducing the amount it pays in to its employees’ direct contribution pension scheme.

Under its pension scheme for UK staff, employees across all age groups are expected to make a minimum contribution of 2% of their salary, whilst Aon contributes a standard 6% for employees in their 20s – this then rises by 2% for every 10 years of age to a maximum of 12% for those aged 50+.

But the company says that due to a combination of the current economic climate, its need to increase efficiency and reduce costs, it intends cutting its standard contribution to 6% across all age groups.

However, the company has said that if employees want to increase their own contributions, then it would match the additional payment up to a maximum of 2% for workers in their 20s and 30s; up to 4% for those in their 40s to a maximum of 6% for the over 50s.

Explaining the company’s decision, Peter Harmer, Chief Executive of Aon UK, said that many companies are looking at ways of reducing their fixed costs - through such measures as freezing pay, reducing hours, four day weeks and enforced sabbaticals on greatly reduced levels of pay. But all of these were “short-term fixes,” he claimed and argued that Aon was “taking a different, longer-term view”.

“Our proposal involves moving to a lower standard employer contribution, but supporting this with an offer to match contributions up to a certain level, depending upon an employee’s age group. Put simply, the more an employee contributes, the more Aon will match, up to specified levels,” he said.

But pensions expert and TAEN trustee, Ros Altmann, thinks Aon’s decision to reduce contributions is of huge significance because the company advises other employers on their pension arrangements. 

She warns that it looks like the start of the next phase of employer withdrawal from pension provision. And says that the inevitable consequence of the credit crisis and employers cutting pension contributions, is that people will have to work longer. Adding that instead of “disappearing pensions, soon we will be looking at disappearing retirement.”