Unilever proposes changes to UK pensions and benefits
Unilever is proposing a new approach to its UK pensions and benefits. This is to help address the cost increases faced by the company of offering a Defined Benefit pension and also to better reflect employees’ modern day needs for more flexibility in their pensions and benefits. While offering employees increased choice, the proposed changes would help the company be able to continue to offer a Defined Benefit pension to existing employees.
The proposals include:
- The introduction of a Benefits Envelope for all employees - an amount of money, calculated in the UK as 25% of Pensionable Earnings (before tax is deducted). The Employee can choose how this will be used, for example if they choose to remain in Defined Benefits the cost to Unilever of providing this pension will be deducted from the employee’s Benefits Envelope. This will allow employees to choose how much they want to invest in pensions or elsewhere.
- A change to Unilever’s Defined Benefit pension which would enable Unilever to continue to offer a Defined Benefit pension to current employees but would reduce the amount of Defined Benefit pension that employees earn each year.
- The closure of the Defined Benefit pension to new employees, replaced by a competitive Defined Contribution pension.
- The stopping of the use of an early retirement discretion, an enhancement made at Unilever’s discretion to some of our employees’ pension upon early retirement.
Sebastian Munden, Executive Vice President, Unilever UK & Ireland said:
“Today we are one of the few leading British companies that continues to offer a Defined Benefit pension to current and new employees, but in the last six years alone, the cost of providing this has increased by over 75%.”
“We want to continue to offer a Defined Benefit 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 Defined Benefit pension for existing employees and, at the same time, to introduce more flexibility in reward and benefits.”
The company has announced today, Monday 2nd December 2019, that it will be entering into consultation on these proposals with employee and Trade Union representatives in the UK and that no changes will be implemented before June 2020 at the earliest. All employees will be invited to input into this formal consultation via their representatives and will be updated regularly throughout.
Notes to editors:
Additional detail on the proposals:
Unilever is proposing a new approach to its UK pensions and benefits. These proposals include:
- A change to of our Defined Benefit Career Average pension for current employees which would reduce the amount of Defined Benefit pension that employees earn each year. This is achieved by a:
- Change to the rate at which future pension entitlements build, from 1/60th Accrual Rate to an 1/80th Accrual Rate, which will reduce the amount of pension that employees build up.
- Change to the Higher Level for Pensionable Earnings from £60,500 to £45,000, which means that employees who earn over £45,000 will earn less Defined Benefit pension each year.
- The introduction of a Benefits Envelope - an amount of money, calculated in the UK as 25% of Pensionable Earnings (before tax is deducted). This Benefits Envelope will replace the current Unilever employer costs to pension and allow employees to choose how much they invest in pension or in other ways. Employees will be able to allocate their Benefits Envelope to a combination of certain benefits, including:
- a Defined Benefit pension
- a Defined Contribution pension
- a top-up to their Life Assurance
- as extra take-home pay (subject to tax and National Insurance).
- The closure of the Defined Benefits pension for new employees. Instead, new employees will have a Benefits Envelope and the opportunity to save for pension through a Defined Contribution scheme.
- The future removal of the use of an early retirement discretion, an enhanced pension given at Unilever’s discretion to some employees upon early retirement.