The company, which owns famous brands such as Marmite, PG Tips and Magnum ice cream, has announced today that it is closing its final-salary pension scheme.
The business has stated that it will start a 90-day consultation with its staff members about the scheme, planning ultimately to replace it with a ‘defined benefit’ career average pension plan.
Three quarters of its 7,000 members are currently part of the final-salary scheme and as well as receiving the new plan, they will also gain a defined contribution investment plan under the proposed new arrangements, starting from January 1st 2012.
The scheme was closed to new members in 2008 due to a deficit the company scheme currently has of £680 million, leaving 5,200 members suffering.
This type of scheme was once seen as one of the many incentives to joining a large company as it is a guaranteed payment, whereas defined benefits are just that; defined on the employee performance and contributions.
Unilever’s UK and Ireland chairwoman, Amanda Sourry said that the pension fund was unaffordable and unsustainable, stating: “Unilever is committed to being a sustainable company in everything we do and our pension arrangements are no exception.”
In February, the company announced a pre-tax profit of £6.1 billion, up 18% from last year, so this deficit and subsequent cut of the final-salary scheme seems difficult to understand for its members.
Amanda Sourry said: “Going forward, one of the principles we want to establish is that both the responsibility and risks involved in saving for retirement are more equally shared between Unilever and its UK employees.”
Not the first
Roger Turner, chief executive of lobby group the Occupational Pensioners’ Alliance said that the UK has seen a decline in final-salary schemes over the past 20 years.
Asda, Northern Rock, Aviva, Vodaphone and Barclays are just some of the other large corporations that have also closed their final-salary schemes due to the risk being placed solely on the employers’ shoulders with this scheme.
Under the final-salary scheme, when a poor investment return occurs, employs fill the shortfall with their own money, meaning that it is a bad scheme for employers. However, under the new defined benefit scheme, employees are the ones who foot the shortfall.
Turner said: “Firms are ditching these schemes because they aren’t affordable. It cuts costs for firms but transfers risk to the pensioner, which isn’t great for pensioner poverty.”
Anyone looking to calculate their pension should use the pension calculator found here