Contributions
Your contributions are 5% of your pensionable earnings between two levels. At 1 April 2010, the lower level is set at £5,032 and the higher level is set at £39,737. Please note: Unilever will review these levels each year and may change them with effect from 1 April in any year. You must make contributions through the Unilever Contribution Arrangement.
Tax advantages
The real cost to you is lower than 5% because of the tax advantages that apply to your contributions.
Tax relief applies to your contributions at your highest rate of tax. So, if you pay the basic rate of tax (currently 20%), every £1 contribution you make only costs you 80p. If you pay the higher rate of tax (currently 40%), the same £1 contribution only costs you 60p.
Unilever Contribution Arrangement
As a plan member, you take part in the ‘Unilever Contribution Arrangement’.
Broadly speaking, this means that Unilever pays directly into the Unilever UK Pension Fund an amount equal to the contributions you would otherwise have paid (instead of you paying them out of your salary). You agree that your pay is reduced by the same amount. This allows you and Unilever to make National Insurance savings on the amount. For further information about how this works see What is the Unilever Contribution Arrangement?
Unilever contributions
Unilever pays the running costs of the plan, and the balance of the amounts needed to provide the plan benefits not covered by the members’ contributions.
This means that Unilever’s contributions vary from time to time. Each time the plan undergoes a ‘valuation’ (a regular ‘healthcheck’ on its finances), Unilever and the Trustees agree the level of contributions Unilever should pay.
Unilever will also arrange a contribution of 12.5% on any of your pensionable earnings above the higher level. You can normally benefit from this contribution in one of three ways:
- A contribution to an Investing plan account;
- A payment straight into your salary – but less deductions to take account of tax and National Insurance; or
- A combination of the two.
Please note that if your pensionable earnings are currently just over the higher level, the 12.5% contribution may be below the minimum amount needed for a pension contribution. If this is the case, you will receive the contribution as cash with your normal pay. This means that if you earn between £39,737 and £41,657 you would currently receive the contribution as cash with your normal pay (based on the levels at April 2010).
Bear in mind that because both the higher level and the minimum amount will change in the future, there may be times when you have to take the contribution as cash, even if you previously received it as a pension contribution.
You have the opportunity to change the way you receive this contribution once a year, in October.