Unilever pledges to keep final salary pension scheme open

Unilever, the consumer goods company which runs one of the country's largest defined benefit pension schemes, yesterday warned staff their 10-year holiday from pensions contributions would come to an end in January as a result of the impact on the fund of weak equity markets.

But it said that it was "reaffirming its commitment" to keeping its £4.2bn defined benefit scheme open at a time when many companies are closing them in favour of defined contribution contracts.

Unilever said: "In view of the current performance and trend in equity markets, it has been decided that the current contribution holiday will end and that contributions in the UK will resume from 1 January 2003."

Unilever's public commitment to keep its defined benefit pension open comes after many high street names have closed theirs to new members. They include Boots, J Sainsbury, Dixons, Safeway and Marks & Spencer. Iceland and the accountancy firm Ernst & Young have closed their defined benefit schemes to any further contributions.

Prudential, one of the largest pension providers, recently said it wanted to close its defined benefit scheme to new members.

The shift has caused consternation among unions and consumer groups because defined benefit schemes promise a fixed sum on retirement. If there is a shortfall between the promised sum and the actual fund, the employer must make up the difference. Defined contribution schemes make no promises about the final sum.

Unilever is phasing in contributions and said it expected to pay 13 per cent of salaries into its pension fund by January 2004.