AA proposals could cut member pensions in half - GMB

Proposed changes to the AA pension scheme could see staff retirement income "slashed" by 49.8 per cent, according to the GMB union.

Following the announcement that AA had begun a consultation on proposed changes to its defined benefit (DB) pension scheme, the GMB union has claimed that detailed figures released by the company show that staff retirement income could be up to 49.8 per cent less following the changes.

The union described the proposals as an “attack” on the scheme, motivated by a desire to reduce AA’s funding of the scheme from up to 13.9 per cent up to 7 per cent.

GMB, which is not the recognised union for AA, highlighted that the firm have paid more than a third of a billion in dividends to shareholders over the last two financial years, stating that this “adds insult to injury” for the staff affected by the changes.

The union have also claimed that AA chief executive Simon Breakwell has had his own pay packet increased by 280 per cent, up to £1.4m, between 2018 and 2019.

However, an AA spokesperson said: “The GMB is not the recognised union of the AA and their figures are totally inaccurate and misleading.

"If they had looked at the relevant AA annual reports they would have learnt that Simon Breakwell was an AA non-executive director up to August 2017 and therefore comparing a full year’s salary as a CEO with a partial year’s salary as CEO is disingenuous and wrong.

"Their 280 per cent figure is complete garbage.”

GMB senior organiser, Andy Prendergast, said: “By cutting staff pensions whilst paying hundreds of millions in dividends, AA chief executive Simon Breakwell has shown his true colours.

“The truth is that since its sale to private equity in 2004, we have seen a British institution saddled with debts whilst being asset stripped by a series of profiteers.

“The latest of these is Simon Breakwell, a man happy to fill his and his shareholders pockets whilst hard working staff see their retirement incomes slashed.

“For more than fifteen years GMB has warned about the dangers of excessive debt, whilst successive governments and the stock market did nothing but count their grubby gains. It’s roadside robbery.

“Now it’s the staff who stand to pay the inevitable price. We call on them to stand with GMB against those who have reduced a much loved company into a personal piggy bank and to resist these devastating changes.”

The proposed plans would see the DB scheme close to future accrual, and would transfer any employees still in the scheme into a defined contribution (DC) arrangement, though all accrued benefits in the DB scheme would remain protected.

The 60-day consultation with IDU, the recognised union for AA staff, and the Management Forum began last Friday (17 January), with the first meeting between the parties taking place yesterday (23 January).

Last week (17 January) AA issued a statement which read: “As part of our broader strategy, we have announced a consultation on some proposed changes to our DB pension scheme.

"The main proposal is to close our DB scheme to future accrual and to transfer those employees still in the scheme to one of our defined contribution schemes. All accrued benefits in the DB scheme will be protected.

"This is in-line with what most responsible companies have already done. In fact, 95 per cent of FSTE 250 companies no longer have fully open DB schemes.

“We have briefed our 7,500 employees last week and also briefed our recognised trade union, the IDU, and our Management Forum who represent management employees. We have already briefed our pension trustees. The formal 60-day consultation period with the IDU and the Management Forum started on Friday 17 January.

“Some 2,800 employees out of 7,500 are in the defined benefit scheme. The proposal does not affect any employee who joined after 1 October 2016 who are already in one of our defined contribution schemes.”

    Share Story:

Recent Stories

Climate Investing
Laura Blows speaks to Aled Jones, Head of Sustainable Investing for Europe at FTSE Russell, and Adam Matthews, Director of Ethics and Engagement for the Church of England Pensions Board, about the role of climate investing within a pension fund portfolio.

Managing volatility
In the latest Pensions Age podcast, Laura Blows speaks to Cambridge Associates head of European pension practice, Alex Koriath, about the Covid-related market volatility and how pension funds can prepare for the challenges ahead

De-risking options for pension schemes
In this latest Pensions Age podcast, Linklaters' Sarah Parkin talks to Laura Blows about the wide range of choice available to pensions schemes for the partial, or full, removal of their risks

Risk transfer opportunities
Laura Blows speaks to Lisa Purdy, Head of Fiduciary Distribution at Legal & General Investment Management and Gavin Smith, Pricing and Execution Director - UK PRT at Legal & General, about the impact of the recent market volatility on the bulk annuity and risk transfer market and the potential opportunities for the future

Bulk annuities during coronavirus
Laura Blows speaks to Just business development manager Prash Mehta about the impact of coronavirus on transactions