Unilever says it will close its final salary scheme as it has become 'unaffordable and unsustainable'
Household goods group Unilever has become the latest firm to drop its final salary pension scheme in a move that will affect more than 5,000 staff.
The group, whose products range from Persil to Marmite, said it was closing the scheme after it became "increasingly unaffordable and unsustainable". It closed the scheme to new members in 2008, but today's announcement means it will also close to current members. Three-quarters of its 7,000 UK workers, about 5,250 staff, are active members of the scheme.
Unilever will begin consultation over the decision with staff and unions from June. An executive said the group had no choice but to face up to a "difficult issue" that has troubled other established businesses across the UK.
Amanda Sourry, chairman of Unilever UK & Ireland, said: "One of the principles we want to establish is that both the responsibility and risks involved in saving for retirement are more equally shared between Unilever and its UK employees. Like many other companies that have already taken similar action, we must face up to this difficult issue now so we can continue to work to ensure Unilever remains a winning and competitive business in the UK."
Unilever plans to replace the pension from January next year with a two-part scheme consisting of a defined-benefit, career-average plan, together with a defined-contribution investing plan.
Companies have been closing final salary schemes in droves in recent years as poor investment performance and rising longevity have left them facing significant shortfalls.
Unilever said it had paid £580m over the past three years to address its pension fund deficit. Final salary schemes are seen as the most generous of pension funds for employees, as they offer guaranteed payments. Defined contribution schemes are based on the level of payments made into the fund and investment returns.