AA plans £11m DC scheme ‘enhancement’ alongside DB closure

AA claims its consultation on changes to its defined benefit (DB) pension scheme has resulted in a planned “enhancement” to the defined contribution (DC) scheme for affected employees.

The automobile repairs provider said in a trading update that the enhancement would cost around £11m over a period of three years, commencing from 1 April.

However, the roadside recovery provider said the closure of the CARE section of its DB pension scheme to future accruals would reduce pension cash costs by around £4m per annum.

Approximately 2,800 of the company’s 7,500 employees are currently members of the DB scheme.

In January, the GMB union, which is not the recognised union for AA, slammed proposed changes to the firm’s DB scheme, arguing that pension pots would be exposed to stock market fluctuation and leave members in a "retirement nightmare".

However, AA stated at the time that the plans were “in-line with what most responsible companies have already done”, explaining that “95 per cent of FTSE 250 companies no longer have fully open DB schemes”.

The company’s new trading update also added that completion of a triennial review of its defined benefit pension scheme showed a reduction to its technical provisions deficit of 64 per cent, from £366m on 31 March 2016 to £131m on 31 March 2019.

Annual cash savings arising from the review are expected to amount to roughly £6m per annum year on year.

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