Heineken has introduced a new defined contribution (DC) pension scheme as part of changes to its pension provision for existing and new employees.
As part of the changes, the beer and cider firm has also closed its defined benefit (DB) scheme to new employees and stopped future accrual for existing employees.
The new DC arrangement, launched in July 2011 with Standard Life, enabled employees to choose to sacrifice a minimum of 3% of salary, which will be matched by Heineken to a maximum of 12%.
The scheme includes death in service cover of seven times pensionable salary, and ill health protection worth 50% of pensionable salary, as well as 15% of pension contributions until the normal retirement date.
In addition, the DC arrangement has been designed to meet the Pension Quality Mark Plus standards as set out by the National Association of Pension Funds (NAPF).
Heineken began a review of its UK pension provision in November 2009 which covered the Scottish and Newcastle Pension Plan, a DB scheme which includes legacy categories arising from previous acquisitions, for example Scottish and Newcastle, Courage, and Bulmers.
In 2009, the Scottish and Newcastle Pension Plan reported a funding gap of £570 million. The firm has already committed to a 12-year recovery plan, which involves additional contributions from Heineken starting at £30 million this year and rising to as much as £61 million a year by 2014.
Following the recommendations of the review, an employee consultation was undertaken, with input from the Heineken Employee Council, and individual employees.
Once the decision to go to launch the DC scheme had been confirmed through consultation, Heineken implemented an employee engagement programme, which resulted in an active sign up of around 95% of the eligible employee base.
The new arrangements have no impact on existing pensioners or those who have deferred benefits arising from previous schemes. All benefits earned to date in the current scheme are preserved by legislation, including those earned by existing employees.
Robin Pring, HR director of Heineken UK, said: “In common with many businesses across the UK, we face challenges to manage our long-term pension commitments and to ensure that we have a sustainable and secure pension scheme for all stakeholders.
“In simple terms, increasing life expectancy, changes to legislation and investment and inflation volatility meant that the current arrangements were not sustainable.
“While the closure of our DB scheme was disappointing news for many, I am confident that we have put in place a competitive and flexible DC scheme to replace it.
“We now have a scheme that is attractive, sustainable and in the best interests of all pension stakeholders – including deferred and retired members.”
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