'Investing for a good pension' series
October 2022
Part 1: Why the Unilever Pension Fund invests
As a pension fund, we are very aware that pension is about the money that employees and employer pay together for the employees’ retirement. Naturally, we handle that money with great care. In this first edition of the ‘Investing for a good pension’ series we explain why it is necessary that we invest the money.
A good pension costs a lot of money: much more than is paid in contributions. It is therefore necessary that we invest the contributions which employees and Unilever pay together. This is the only way that can we ensure that:
- we have sufficient capital to pay your pension (in due course) for life.
- we can regularly increase your pension (indexation), so that - despite inflation - it retains its value as best as possible.
Leaving the money in the bank does not yield sufficient returns, especially at today's low interest rates. In short: a good pension cannot be achieved without investing.
Long-term goals
Pensions are about the long term. When a member joins Unilever at the age of 25, we will be connected with him or her (and any partner) for about 60 years on average. Fortunately, this means a poor investment year will not pose a problem, as enough good years (historically speaking) will follow. For instance, Progress (Forward has only existed since 2015) achieved an average return of around 7% over the past twenty years.
Do you know: for every euro deposited, you will get back (thanks to investment results) an average of two to three euros. This is based on historic figures.
You may be thinking 'I'd rather do that investing myself'.
It is good to realise that the content of your current pension scheme (both of Forward and Progress) was jointly determined by Unilever and the trade unions (collectively referred to as 'social partners'). They have appointed us (the Unilever Pension Fund) as the pension scheme administrator and have decided that we should invest for you - and for all our other members.
This means that members are not permitted to invest the contributions themselves. Together with the social partners we are also convinced that you are better off in a collective for which there is joint investment.
Advantages of a pension fund:
- Pension funds are not for profit; the full return on the investments (after deduction of costs) accrues to the pension pot.
- Thanks to their size (Forward and Progress each have invested assets of hundreds of millions of euros), pension funds have relatively low costs.
- Pension funds are able to spread their investments very well (across various categories, as well as per sector and geographically), so limiting risk.
- Investment specialists are well trained for this, have extensive experience and are constantly alert to changes in the market.
- Setbacks are shared by all the members (solidarity) and can be spread over time.
- Pension funds can influence the policy of the companies in which they invest (for example in the field of sustainability and human rights).
This covered WHY we invest.
In the next article, you will read more about HOW we invest.
'Investing for a good pension' series
Part 1: Why we invest
Part 2: How we invest
Part 3: Investing in practice (follows later)
Part 4: Investing now versus investing in the new system (follows later)
Part 5: Sustainable investing (follows later)