Royal Mail CDC pension scheme gets government commitment

The Government have expressed their commitment to Royal Mail and the CWU today, to bring forward legislation to enable Collective Defined Contribution (CDC) pension scheme at the earliest opportunity. We have reported on Royal Mail and the CWU reaching an agreement acceptable to both parties regarding CDC pension scheme. In reality, nothing has changed so it puts a question mark on when will the “earliest opportunity” will take place?

2018 Royal Mail and CWU agreement on CDC pension plan

Pensions

• The Royal Mail Pension Plan (RMPP) will close to future accrual in its current form on 31 March 2018.
• Royal Mail and the CWU have committed to work towards the introduction of a Collective Defined Contribution (CDC) scheme for all employees. This will be subject to necessary legislative changes being enacted. A Defined Benefit Cash Balance Scheme (DBCBS) will sit alongside it.
• Transitional pension arrangements will be put in place from 1 April 2018 until a CDC scheme can be established. These comprise a DBCBS and an improved Defined Contribution scheme.
• The ongoing annual cash cost of pensions will continue to be around £400 million.

“This is very welcome progress. Royal Mail and CWU have been campaigning together to bring about this legislation, building a cross-party alliance of supporters in both Houses of Parliament as well as working with Government. We now look ahead to the next stage, and ultimately, delivering the UK’s first CDC pension.”
-Jon Millidge, chief risk and governance officer, Royal Mail

“The pensions industry desperately needs innovation if we are to enable people to retire with dignity and security. An occupational wage in retirement scheme design running alongside one’s state pension has proven to enable those objectives. DB is the gold standard of that design and should be maintained wherever possible, however, where it cannot, there have to be more options than simply DC schemes.The CWU is proud, along with Royal Mail, of being at the forefront of such innovation and will be delighted to prove that CDC options will prove to be a watershed moment in pension provision and benefit working people way beyond our own membership.”
-Terry Pullinger, deputy general secretary (Postal), Communication Workers Union