CDC: explanation and risks

You are employed by Unilever Netherlands. Therefore you are automatically a participant in the Unilever pension scheme, carried out by Forward.

Your Forward pension scheme is a so-called 'CDC scheme'. CDC stands for Collective Defined Contribution. Subsequently we explain what this means.

What is CDC?

The abbreviation 'CDC' stands for Collective Defined Contribution. Such a pension scheme works as follows. Yearly Unilever Netherlands pays Forward a certain amount of money. That’s the ‘defined contribution’, meant for the pension accrual of all employees (the collective) in that year. The contribution Unilever Netherlands pays is determined once a year, following a set calculation method.

Normally this (total) contribution is enough for the pension accrual we aim for. Every Unilever employee will accrue a certain amount a year, based on his/her salary. This yearly accrual will add up to the total pension amount that you will receive after your retirement for the rest of your life. Your total pension is therefor based on the average salary throughout employment with Unilever. This makes the Unilever pension scheme a so-called career-average pension scheme.

CDC is a collective arrangement, which means that you share the risks with all your Unilever Netherlands colleagues. This is different from a 'normal' (non-collective) DC scheme, where you, as an individual, have your own pension pot for which you bear all the possible risks yourself.

What are the risks involved

The amount of your pension is not fixed. This is due to the following uncertainties:

People are getting older on average
This means that Forward has to pay the pension for a longer period.

Low interest rates make pensions more expensive
 As a result, Forward needs more money to pay the same pension.

The results of the investments can be disappointing
 As a result, Forward's assets will increase less than necessary.
The result is that you run the following risks:

No annual increase in your pension
We try to increase your pension every year, because the prices usually also increase each year; such an increase in your pension is called indexation. Our goal is an indexation that is equal to the increase in the negotiated (CLA) wages at Unilever. Indexation is only possible if Forward has enough money for this. If there is insufficient money, we can not increase your pension.

Reduction of your accrued pension
If our coverage ratio becomes too low, we will not receive anything from Unilever. A situation may arise in which Forward has so little money that we have to reduce your total accrued pension. We only do this in the most extreme case.

Reduction of your pension accrual in a year
If it turns out afterwards that the premium paid by Unilever is insufficient to realize the annual pension accrual, the accrual of that year must be reduced. Unilever does not transfer any extra money to us.
The chance of this is small at Forward, because we determine the premium every year. With some pension funds, this is done every five years, which increases the chance of unpleasant surprises.

How does a CDC scheme work?
  • Unilever pays a fixed premium to Forward annually. You pay a part of it yourself; this is deducted monthly from your salary.
  • The salary you earn from Unilever is the basis of your pension accrual. You do not accrue pension on part of your salary. That part is called the franchise. You will receive AOW from the government for this in its place. Your salary minus the franchise = your pensionable salary.
  • Our goal is that you accrue 1.875% of the pensionable salary per year. This way, in 40 years you can accrue a pension that is 75% of your average salary.
  • Your accrued pension will be worth less in the course of time due to inflation. That is why agreements have been made about the increase of your pension. Such an increase is called indexation. We aim to increase your pension with the CLA wage increase.
  • An annual indexation is not certain, but depends on Forward's financial position.
  • The amount of your pension is not fixed. There is a risk that we will not be able to realize the pension accrual in a year and we will have to lower it. In the most extreme case, we may have to reduce your total accrued pension. These risks lie with you as an employee.