As this piece of news shows, not all DB schemes need to be written off as too big a liability to manage going forward. Sometimes, with a willing workforce and management, some compromise can be considered to protect a valuable employee benefit in a format the company can sign up to financially now and for the future.
Even with a salary cap of £45,000 (plus a link to CPI), this level of income in retirement is hard to achieve through a defined contribution only pension, so it must be a hugely reassuring position to be in as a Nestle employee.
Most people retiring now and probably for the next 10 years are likely to have a combination of some DB pension and some DC pensions. With the wider pension freedoms it is vital that at the point of retirement people seek advice to ensure that they make the absolute best of their pensions to enable them to make the most of their retirement.
For some people, consolidating various DC pensions may be the best option. For some with very particular circumstances, it may even be suitable to review whether transferring their DB pension into a DC environment is right for them.
Every individual will have a choice that is better for them and it's vital that they are supported and guided to make a well-informed decision at retirement.
Food and drink organisation Nestle has agreed to a pay and pensions deal for 7,600 UK employees put forward by the GMB and Unite trade unions. The new package includes a career average defined benefit (DB) pension based on an 80th accrual rate for all existing members, the introduction of a salary cap for DB pensionable earnings of £45,000 indexed to the consumer prices index, normal pension age to be linked to state retirement age, and the closure of the scheme to new Nestlé employees from 1 July 2016.