This page created 1 Nov 2002

At the moment, October 2002, Unilever is in the news because it is asking its employees to pay more in contributions to the pension fund.  It is worth noting that even after the changes, the Unilever scheme will be better than IBM's in several respects.

In some ways Unilever and IBM are comparable.  Both have their UK affairs controlled from abroad.  The funds are of similar size, positioned at 25th and 27th in a listing of UK Pensions Funds by size in 2001.  No two schemes are exactly comparable - salary scales will be different, the deeds will give different powers to the employer, the scheme structure may be different and so on.  (The Unilever scheme structure is more akin to the IBM N-Plan than to the C-Plan).

However, you will probably judge that the Unilever scheme provides its members with more security about the future.

Unilever has said it is committed to retaining a final salary scheme in the UK "as far forward into the future as anyone can see". IBM decided to close its final salary scheme to new members in 1996 (just before the regulations introduced Member Nominated Directors who might have had an influence on the decision).

The Unilever pensions-in-payment policy (PIP) is a guaranteed protection against inflation up to 5%. (This is known as Limited Price Indexation).  If the inflation is more than 5% then Unilever can approve a matching increase.  That hasn't applied in recent years but when it did in the early 1990's, the full matching increase was approved.  So Unilever retirees have seen no erosion in the value of their pensions.

The IBM PIP policy exhibits a difference between what is said (promised/expected?) and what is done. In practice, the 1991 retirees will have seen an erosion of about 8% in the value of their pensions.

The contribution rate for Unilever employees has been zero percent of their salary.  (Since 1991, with a short exception in 1995-1996).  That contribution rate is being increased to 2%.  The IBM C-plan contribution rate is and has been 4%.

It is revealing to compare the Unilever website with the IBM one.  The Unilever site gives an impression of genuinely wanting members to be informed - there are copies of the Trust Deeds and the members Handbook on the site.  There is a FAQ's section, a news section that can be set to email the user when there is new news, a way to have the employee's prospective pension calculated instantly, a way to see the user's last pension statement, a survey the user can fill in, etc.

The Unilever site also makes this AMIPP one look rudimentary in presentation.  We have a an excuse for that - you cannot expect the efforts of amateur volunteers to match those of a professional team.

What is it that explains the big difference between the Unilever pensions scheme and the IBM scheme, in benefits and attitude?  Perhaps the major factor is that the company appointed trustees are not in a majority at Unilever.  (The split is 7:7).  For instance, that allowed members to influence whether the member contributions should be raised as an alternative to closing the scheme to new members.  Such an influence was not possible when the IBM Trust chose to allow closure.

Acknowledgement: J Gilchrist introduced the Unilever scheme as a subject on the message board.