New members will have the option to join a hybrid scheme, in which their pension will partly rely on their average salary during their service with the company, which will be capped at earnings of £35,000 a year.
As part of the new plan, the estimated 7,000 current plan members will have to pay higher contributions each year, up from 5% to 7%, from the start of 2008, or they can join the new plan if they choose not to.
Like those other new participants, they will be charged 5% of their salaries each year for the career average element, on earnings up to £35,000 a year. For any earnings above that, they and the new recruits will not have to make any contributions.
For earnings above that level, they will have a money purchase pension plan. The company will pay the equivalent of 12.5% of those earnings into the members’ money purchase plan part of the new scheme, or members can choose to take those company contributions in cash..
According to the BBC, the decision to close the plan was an effort to make Unilever’s future pension costs more predictable and had nothing to do with its pension shortfall. The company plans to pay off its pension debt over the next eight years, including the payment of an additional £510 million in contributions.
Unilever’s UK pension scheme currently has 40,000 pensioners and 40,000 deferred members – former staff members who have not yet retired. The company said the pensioners and deferred members would not be affected by the proposed changes.