Unilever proposes career average for UK
UK - Household goods giant, Unilever, is planning to introduce career-average pensions later this year, subject to approval from trustees of its £5bn (€7.43bn) British scheme.
The existing final salary arrangement will close to new members and existing members will be asked to up their contributions from 5% to 7%.
New joiners will contribute 5% to the career-average scheme, which applies to annual earnings up to £35,000.
Above this limit, the company will offer a defined contribution (DC) arrangement into which it will put 12.5% of salary. Employees will not be asked to contribute to the DC element and they may instead take the company contribution as cash.
A Unilever spokesman confirmed that the new arrangement was expected to be cheaper for the company but emphasised that savings would take decades to materialise because it was a scheme for new joiners.
Asked whether trustees could reject the proposal, he replied that the company as sponsor drives strategy but that the trustees' consent was essential.
The company is currently in the midst of an extraordinary refunding programme of the pension scheme which includes an additional £510m in cash by the end of the next financial year.
The spokesman said that the two-tier proposal reflected modern careers where higher earners are more likely to change jobs and thus needed more flexibility over retirement contributions, while the lower-paid enjoyed a more equitable redistribution from assets in total via career-average arrangements.
This view was shared by former head of UK pensions at Unilever, Chris Lewin. He applauded Unilever for reaffirming its commitment to defined benefits for current and future workers and said that it was the lower-paid who were most at risk from defined contribution schemes that left them dependent on investment returns and economic conditions at the time of retirement.
"I expect many employers who moved to DC will be considering moving back to DB in the next few years, at least for those on lower pay levels," he said.
Unilever's other major pension scheme in Europe, for Dutch employees, moved to career-average benefits last year.