On the go: Unilever is poised to close its defined benefit scheme to new members, in an attempt to reduce increasing costs and allow greater flexibility for employees.
The company’s DB scheme will be replaced with a defined contribution scheme, while the value of pension provision for existing staff members will be reduced.
Unilever said that these proposals would “better reflect employees’ modern-day needs for more flexibility in their pensions and benefits”, and would also allow the company to continue to offer a DB pension to existing employees.
The consumer goods manufacturer will introduce a benefits envelope – an amount of money calculated as 25 per cent of pensionable earnings before tax – which will allow employees to choose how much they invest in pensions or in other products.
This money can be allocated to either a DB pension, a DC plan, used as a top-up for a life assurance fund or as extra take-home pay, although tax will be payable on this option.
There will now be a consultation on these proposals with employees and trade representatives. No changes will be implemented before June 2020 at the earliest.
Sebastian Munden, executive vice-president at Unilever UK and Ireland, said: “Today we are one of the few leading British companies that continues to offer a DB pension to current and new employees, but in the past six years alone the cost of providing this has increased by more than 75 per cent.
“Keeping in mind how important it is for us all to save for the future, we have developed a proposal that allows us to continue to provide a DB pension for existing employees and, at the same time, to introduce more flexibility in reward and benefits.”
However, these proposals have been criticised by a group of trade unions, which stated that the plans “smack of opportunism”.
The joint trade unions, compromising of Unite, the Union of Shop, Distributive and Allied Workers and GMB, stated there was no justification for these scale of changes, as the pension scheme remains fully funded and has a “strong covenant”.
The unions stated that rising costs of running the scheme was no justification for its closure and for implementing a two-tier pension provision, especially from an employer who is as large and successful as Unilever.
