Royal Mail Pension Update – Government Commits To Legislate For CDC Pensions

Royal Mail Pension Update – Government Commits To Legislate For CDC Pensions

Key points

The Government has today published its response to the consultation on Collective Defined Contribution (CDC) schemes. We welcome its response, which outlines its commitment to bringing forward legislation to enable CDC schemes at the earliest opportunity.

This consultation follows an agreement reached between Royal Mail and the Communication Workers Union (CWU) in February 2018 to pursue a CDC pension. Both parties agreed that a CDC pension would meet our mutual objectives of providing sustainable, affordable and secure future retirement arrangements for all employees.

We believe that the CDC scheme is a fair proposal that compares favourably with the retirement benefits offered in our industry and by other large UK employers. The Government’s response brings us one step closer to making CDC a reality in the UK.

We will update employees on progress as we move towards implementation and will write to them with more scheme details in due course.

 

Jon Millidge, Chief Risk and Governance Officer, Royal Mail said:

“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.”

Terry Pullinger, Deputy General Secretary (Postal), Communication Workers Union said:

“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.”

 

Ends

Notes to editors

About Royal Mail plc

Royal Mail plc is the parent company of Royal Mail Group Limited, the leading provider of postal and delivery services in the UK and the UK’s designated universal postal service provider. UK Parcels, International and Letters (“UKPIL”) comprises the company’s UK and international parcels and letters delivery businesses operating under the “Royal Mail” and “Parcelforce Worldwide” brands. Through the Royal Mail Core Network, the company delivers a one-price-goes-anywhere service on a range of parcels and letters products. Royal Mail has the capability to deliver to around 30 million addresses in the UK, six days a week (excluding UK public holidays). Parcelforce Worldwide operates a separate UK network which collects and delivers express parcels. Royal Mail also owns General Logistics Systems (GLS) which operates one of the largest ground-based, deferred parcel delivery networks in Europe.

 

What is a CDC pension?

For CDC pensions, employer and member contributions into the pension scheme are pooled, and this collective pot is then invested. CDC pension plans pay members an income in retirement, rather than members having to buy an insurance product (known as an annuity) or investing their money in another way.

While there is an expected level of benefit that the employee will receive in retirement, this is not guaranteed. The actual benefit payable will depend on the scheme’s investment performance and other factors such as average life expectancy of members. In the anticipated Royal Mail CDC pension scheme, the same annual increase/decrease will apply to all members, whether they are still saving for retirement, have left the scheme or are in receipt of their pension payments.

CDC pensions have fixed contribution rates from the employer and members. In Royal Mail’s anticipated CDC pension, the company would contribute 13.6 per cent of salary, with members contributing six per cent.

 

For journalist enquiries contact:

Helen Greenwood

Email: helen.greenwood@royalmail.com

Royal Mail press office: 020 7449 8246

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