NETHERLANDS - The participants' council of Unilever's Dutch pension fund, Progress, has lost a legal case against the scheme concerning indexation.
The representative body, supported by Unilever's Association of Pensioners, brought a legal case opposing indexation arrangements agreed by the sponsoring company and the unions.
In the opinion of the members' council, the new agreement was a change for the worse compared to previous arrangements.
However, the corporate court, or ‘Ondernemingskamer', has now ruled that the new pension arrangements do not mean a downswing in indexation and has thrown out a challenge to the changes.
According to court documents, the inflation compensation granted by Progress over the last 10 years was based on the so-called ‘Derived Consumers Index' - a consumer index that does not take into account the effects of some indirect taxes.
It is therefore fair that this index has been taken as the norm for indexation calculations under pensions regulation, the court argued.
Officials at Progress pointed out that adjusting the pension arrangements was necessary to comply with the new Pension Act, and stressed the changes would not affect pensions, further adding that the €2.8bn pension fund has always granted full indexation.
Responding to the court's verdict, Patrick van Klink, chairman of the participants' council, said: "We still need to discuss possible next steps, but we are not considering further moves at the moment. What we will do is keep the Progress board alert to the options available which allow it to positively deviate from its indexation rules.
"We were afraid that the board was limiting its policy space by sticking to one standard for indexation, which is less beneficial to pensioners and deferred participants than the regular consumers index," explained Van Klink.
Unilever and the unions agreed in 2006 to a switch from final salary to average salary arrangements, while the sponsoring company at the same time promised its workers unconditional indexation until 2012.
That said, inflation compensation for pensioners and deferred participants was made dependent on the real cover ratio of the pension fund, which must be at least 80% before any indexation could be granted.
The scheme's nominal cover ratio was 119% at the end of September 2009, whereas its real funding ratio was 90%.
Unilever's Dutch pension fund, known as Progress, was founded 86 years ago and now has 25,000 members.