Unilever is closing its UK final salary pension scheme to new entrants who will instead be able to join a hybrid scheme.
The new scheme will have a defined benefit component, based on career average salary for pensionable earnings up to a threshold of £35,000 per annum, and above this a defined contribution component. The scheme will come into effect later this year.
From 1 January 2008, the 7,000 employee members of the existing scheme will be asked to increase their contribution to the fund from 5% to 7% of their salary.
Unilever, the consumer products group said that the decision aims to ensure that employees get competitive pensions on a sustainable basis and have greater certainty about the future cost of pensions.
It claims that the decision is unrelated to its £430m deficit in the final salary scheme. It has committed to making additional payments to the scheme, including £510m in the three years to April 2008, with the aim of eliminating the deficit within eight years.
The proposed changes to the UK scheme will need to be agreed by the fund trustees and will be subject to consultation with employees. The company said that the 40,000 pensioner and the 40,000 deferred pensioner members will not be affected by the proposed changes.