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Unilever workers are crazy to strike over their pensions

Staff at the consumer goods firm should count themselves lucky that the move from a final salary scheme will still leave their pensions among the most generous in the country

Unilever workers are going on strike over their pensions. They’re crazy when the Pot Noodle to Dove soap firm is only downshifting their retirement incomes from final salary to career average.

This is not an offer that deserves to spark a strike, no matter how badly the management have behaved (and according to the unions they have behaved very badly). Their pensions will still rank among the most generous in the country.

Firstly, workers get to keep all their past entitlements. For older workers that means all their final salary benefits until now are kept intact.

Second, it’s true they get a slightly cheaper scheme in the future, but for most factory workers, who will retire on an income not dissimilar to the one they started on (plus inflation), it makes virtually no difference.

Obviously workers are angry at the screamingly high pay of the chief executive and he did his best to inflame the situation last year with a 50% pay rise. It is also the case that Unilever is a profitable company and can afford to bung a bit more in the pension scheme.

Except a final salary pension scheme has become a blank cheque for older workers who expect a caste iron guarantee no matter how long they live and no matter what happens to pension investments.

Employers must add in the region of 40% to 50% to the salary of a worker over the age of 50 who enjoys final salary benefits. In most companies a new employee must join an even cheaper stock market invested scheme dependent on rising share prices. They will be lucky to muster a 10% contribution from their employer.

According to research from Pension Corporation, the additional cost to employers of providing a defined benefit pension has increased by 44% in the last 20 years as a result of government legislation – including the requirement to update pensions in line with inflation.

Pensions minister Steve Webb is considering abolishing the need to up-rate final salary pensions in line with inflation. That’s because employers tell him they will close without this kind of help.

So what are unions doing fighting for final salary schemes when a disproportionate amount of pension scheme cash goes to the better off? Senior staff on big salaries get a bigger retirement pay day under rules that give them two thirds of their last pay cheque. Ask who is driving the 4×4 down your street? Most likely they are a retired Unilever manager, an ex-BT engineer or a former headteacher.

To eradicate the whole problem of underfunding, across all sectors, unions should have approached the pension issue on behalf of future members as well as existing workers. Only one has taken this stance to my knowledge, and that was shop workers’ union Usdaw in 2003 when it persuaded members at Tesco and Sainsbury to relinquish all past entitlements in favour of a career average scheme. These supermarkets remain among the few large employers to maintain a guaranteed scheme for new joiners. Unilever will be one, and without asking for anyone to give up past rights.

Elsewhere the situation is dire. More than 80% of pension savings each month go into ultra-cheap plans that bear all the risk of providing an income.

It would be a shame if Unilever was pushed by a strike to join the majority of employers and cut the career average scheme for new joiners. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds