Unilever is to close its defined benefit scheme to new members after it found costs have increased 75 per cent in the past six years alone.
The company proposed to replace the scheme with a defined contribution scheme, while also reducing the value of pension provision for existing members of staff.
Unilever wants to lower the accrual rate on existing DB pensions and decrease the higher level for pensionable earnings from £60,500 to £45,000.
Instead the company will introduce a flexible benefits envelope, calculated at 25 per cent of pensionable earnings before tax, which will give employees the option to invest the money in either their DB pension, a DC pension, or use it as a top up to a life assurance fund or as extra take-home pay.
The company said the proposals will "better reflect employees’ modern day needs for more flexibility in their pensions and benefits" and allow it to continue to offer a DB pension to existing employees.
Unilever is also looking to remove its early retirement discretion, which is an enhanced pension given at Unilever’s discretion to some employees.
There will now be a consultation on these proposals with employees and trade representatives.
No changes will be implemented before June 2020 at the earliest.
Sebastian Munden, executive vice president at 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 per cent.
“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.”
But the proposals have been criticised by a group of trade unions who argued the plan "smacks of opportunism".
The unions, compromising of Unite, Usdaw and GMB, stated there was no justification for the scale of changes as the pension scheme remained fully funded and had a “strong covenant”.
The unions stated that rising costs of running the scheme were no justification for the closure of the scheme to new members and the implementation of a two-tier pension provision, especially from an employer that is as large and successful as Unilever.
Unite national officer Rhys McCarthy said: “The joint trade unions have serious concerns, not only in relation to the existing provision, but also that if closure of the scheme for new starters goes ahead, this will be the death knell for the scheme in its entirety in the medium term.”