Unilever announces pension proposals for DB scheme

Unilever has announced a number of proposals for the defined benefit section of its UK hybrid scheme, including the introduction of a ‘benefits envelope’ for all employers.

It has also proposed a reduction in the existing DB pension offer, stopping the use of early retirement discretion and the full closure of the DB section to new members.

The company has announced the proposals as a way to address the “cost increases faced by the company of offering a DB pension”, also stating that the changes will “better reflect employees’ modern day needs” for increased flexibility.

All of the proposals are designed to allow the company to continue to offer a DB pension to existing employees, though new starters would no longer be able to join the scheme under any of the options.

One of the key proposals from the employer is for the introduction of a ‘benefits envelope’ for all employees, consisting of a cash sum calculated as 25 per cent of pre-tax pensionable earnings, with the employee then having four options as to how to use this money.

Addressing the costs associated with running the DB, employees would have the option to allocate this money to fund their DB pension, with other options for the fund including a lump sum contribution to their DC pension, a top-up to their life assurance, or as additional take-home pay, although this would then be subject to tax and national insurance.

The proposals also include a reduction to the existing DB pension, which would reduce the rate of accrual from 1/60th to 1/80th, while concurrently changing the higher level for pensionable earnings from £60,500 to £45,000.

The proposals follow contributions of £600m over the last three years from Unilever, with their latest pension fund report and financial statement (31 March 2019) stating that the injection of funds combined with “good investment returns” had meant “the funding position [for the scheme had] improved significantly”.

However, the joint trade unions, Usdaw, Unite and GMB, yesterday (2 December) published their response to the proposals, stating that the move “smacks of opportunism”, arguing that the changes “will look to many staff as a lazy shortcut to help achieve the 20 per cent margin by 2020 target the company has set itself”.

Commenting on the proposals, Unilever UK & Ireland executive vice president, Sebastian Munden, 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 last six years alone, the cost of providing this has increased by over 75 per cent.”

“We want to continue to offer a DB pension for current employees, whilst protecting our company against future uncertainty. As a result, we are proposing some changes to both our pension and our broader reward package.”

“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.”

The company has confirmed that it will be entering into consultation on several proposals with employee and trade union representatives, with no changes to be implemented prior to June 2020.

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