One of Britain’s big four accountancy firms has been forced to abandon plans to slash the sums it pays into thousands of employees’ pension pots following the threat of legal action.
Sky News has learnt that KPMG notified its 17,000 UK staff this week that it was “pausing” plans to temporarily reduce pension contributions for about 3,000 people.
Insiders said that roughly 500 of the affected employees had formed a collective action group to fund a legal claim against the firm.
Where jobs have been lost in the UK economy
Where jobs have been lost in the UK economy
In a memo circulated on Monday, KPMG said it had commenced the pensions consultation in July as “part of a broader range of measures to reduce overall costs in FY21 and to protect jobs in an unpredictable economic environment”.
It added: “We have decided to pause on any proposed temporary change to contributions in FY21.
“We are continuing with our longer-term review of our pension scheme to ensure that we have an offering that is fair to all colleagues, competitive and helps attract and retain the best talent in the market.”
Sources said the proposed reduction in pension contributions to 4.5% of salary would, if implemented, have saved KPMG roughly £10m a year.
The measure would, they added, have disproportionately affected older staff on more generous retirement funding arrangements.
Image: KPMG is one of the UK’s four big accountancy firms
Responding to an enquiry from Sky News, a KPMG spokesperson said: “Like many businesses we have been planning for a wide range of economic outturns.
“Over the course of the summer we have sought and listened to a wide range of views from colleagues on this measure and as we approach our financial year end, we now have a clearer picture of the outlook for FY21.
“As a result, we are pausing the proposed temporary change to employer pension contributions.”
With an average age of 27, most of KPMG’s UK workforce is already entitled to employer pension contributions of 4.5%.
Nevertheless, the climbdown is embarrassing for the firm, which, ironically, announced the sale of its pensions advisory business to a private equity-backed management buyout vehicle several months ago.
Like the other big four firms – Deloitte, EY and PricewaterhouseCoopers – KPMG has been exploring ways to cut costs during the coronavirus pandemic, with business clients cutting back on discretionary corporate spending.
Last week, Sky News revealed that Deloitte was exploring the sale of its restructuring arm, which handles insolvencies and sale processes for financially troubled companies, even as the COVID-19 crisis paves the way for a surge in revenues from the division.
Bill Michael, KPMG’s UK chairman, described the pandemic as “an economic disaster” in April, and further cost-cutting measures are expected from the quartet of major auditors in the coming months.
KPMG has also announced a limited number of redundancies and the closure of some business units.
Deloitte has already undertaken a process resulting in cuts to pension contributions for many staff.
The efforts to reduce costs come as the big four face radical reforms to their businesses, with the UK’s audit watchdog introducing a model called operational separation to segregate their audit and consulting businesses.
That drive has come in the wake of accounting scandals at companies such as BHS and Carillion, which collapsed with the loss of tens of thousands of jobs.