Unilever Netherlands is planning to close Progress, its €6bn defined benefit scheme, and replace it with a collective defined contribution (CDC) pension fund as of 1 January.
The decision comes as a consequence of a collective labour agreement (CAO) between the employer and unions, which included a new pension plan for the company’s 3,000 Dutch staff.
Frans van de Veen of union CNV Vakmensen said: “The advantage of the new scheme (Progress II) for Unilever is that its pension liabilities are to become stable. And for the workers, it is good to have clarity about their pensions arrangements.”
The accrual rate under the new pension plan is to drop slightly to the tax-facilitated percentage of 1.875.
At the same time, Unilever is to improve the arrangement by lowering the franchise – the part of the salary exempt from pensions accrual – by €1,000 to €12,642.
Unlike with many other CDC schemes, the contribution has not been fixed for five years.
“The premium is to be established annually and will, in part, be dependent on the level of interest rates,” said Van de Veen.
Because Unilever will not have to meet any funding shortfall, Van de Veen said he expected the future contribution would be quite stable.
Progress II is to start with a €30m contribution from the employer to increase the potential for indexation.
According Van de Veen, only a “very bleak scenario” would threaten the granting of indexation.
Under the new CAO, the premium for Unilever’s staff will be increased by 0.5 percentage points to 3%, but the increase will be offset by a salary increase of 5.65%.
With a nominal funding of 138% and a real coverage of 104% as of the end of October, Progress is one of the best performing pension funds in the Netherlands.