Last week Royal Mail provided an update on its 2018 Pension Review in respect of the future of the Royal Mail Pension Plan. It was promptly rejected out of hand by the CWU.
Royal Mail’s suggestion is to offer members the choice of joining either a Defined Benefit cash balance scheme or a Defined Contribution scheme. Royal Mail is one of few companies offering to replace one Defined Benefit scheme with another and point out that 97% of their workers currently give up annual pension in favour of a lump sum anyway.
The main difference between the current scheme which gives a defined income in retirement is that Royal Mail are proposing a set contribution which would accrue a cash sum to be spent on an annuity at whatever rates applied at the time or a defined cash sum on retirement (regardless of cost) which again could be spent on an annuity.
Royal Mail have a problem in that their current scheme is unaffordable in the long term (although the pension fund is in the black at the moment). They are offering lob in even more cash, raising the company’s contribution from 12.6% of pay to 13.6% as well as other member benefits, including death in service and ill-health.
The CWU’s complaint is that the proposal does not meet their aspiration of a wage in retirement pension scheme, but rather still promotes the conventional wisdom of a cash-out arrangement at the point of retirement. They say it’s not something that they’re prepared to recommend to their members.
This pension wrangle has been going on for some time and a final solution doesn’t look set to be agreed by Royal Mail and the unions any time soon. Time is ticking away and we’re crossing our fingers that it doesn’t result in strikes, but traditionally if the CWU decide to flex their muscles it inevitably leads to industrial action in the run up to Christmas which is something that everyone (bar the unions) would rather avoid.