LTB 863/11 CWU POSTAL POLICY FORUM 10TH NOVEMBER

[TrueBlueTerrier]

12 October 2011
LTB 863/11 CWU POSTAL POLICY FORUM 10TH NOVEMBER – SPECIAL REPORT ON PENSIONS

No: 863/11
Ref: 67000
Date: 12th October 2011

TO: ALL BRANCHES WITH POSTAL MEMBERS
Dear Colleague
CWU POSTAL POLICY FORUM 10TH NOVEMBER - SPECIAL REPORT ON PENSIONS
On behalf of the Postal Executive, please find attached a copy of the Special Report on Pensions that is being placed before our inaugural Policy Forum for endorsement.
Please also find attached a copy of a letter from the President of the Union setting out how the business will be conducted and the entitlements of Branches.
It is important that all CWU Branches take the opportunity to fully consider the content of this Report.


If Branches require any further information or clarification on the issues contained within the Report, please contact the DGS (P) Department.
Yours sincerely

Dave Ward
Deputy General Secretary (P)




A SPECIAL REPORT
ON PENSIONS TO THE
CWU
POSTAL POLICY FORUM
ON
10TH NOVEMBER 2011
MANCHESTER


Introduction - A Special Report on Pensions to the CWU Postal Policy Forum on 10th November 2011

The subject of pensions remains crucial to CWU members and the ongoing financial viability of the Royal Mail Group. Pensions form a central element of reward for employees and everything which is happening in the company, from modernisation to ColleagueShare, is influenced by a reported £10.3bn deficit and payments of £300m per year the company is required to make to cover this.
The debate over the continuing affordability of pensions was also central to the recommendations in the Hooper Report and underpinned much of the rationale behind the Government's Postal Services Act 2011.
In the wider political arena the publication of the Hutton Report and the imminent public sector pensions dispute has ensured that the overall subject of pensions has now become one of the major political issues of our time.
Understandably, having already seen the impact of pension reform in 2008, CWU members will want to know what all of these developments mean to their pensions, how all of this impacts on the future of the company and what the Union is doing to secure their pension entitlements.
Against this background, the Postal Executive has agreed to hold our first ever Policy Forum on the subject of pensions.
The innovation of decision making Policy Forums is a real opportunity for all of us to engage in constructive and informed deliberations. To facilitate the Policy Forum we are publishing this comprehensive report which addresses the full range of pension issues.
The objective is to unite the Union behind a credible pensions policy that will enable us to respond to the major challenge of pensions in today's society.
The report covers the following sections:-
Section 1 Pensions in Context
Section 2 The 2008 Pension Reforms
Section 3 The Postal Services Act -The Proposed Changes to Pension
Arrangements.
Section 4 RPI versus CPI
Section 5 How does CWU fit into the Public Sector Pensions Debate/Dispute
Section 6 Pensions - The Link to EU State Aid and Privatisation
Section 7 CWU Policy Going Forward
Section 8 Summary and Recommendations
Appendix A-Pension Plan Membership Figures as at 30th June 2011

Section 1 - Pensions in Context

The challenge of our pension policy is not a simple issue of confronting the employer, or even the Government. Our policy has to be set against a background of the environment the company now operates within and also the major challenges to pension provision in society today. This is because our bargaining position will be conditioned internally by the overall fortunes of the company and externally by the whole labour market and prevailing economic conditions.
The Pension Challenge within the Royal Mail Group
The CWU has long recognised that Royal Mail is struggling under a massive pensions deficit. This stood at £10.3 billion at its last triennial actuarial valuation in 2009. This is likely to reduce in 2012 but the overall position will remain volatile.
To illustrate the sheer scale of the problem annual deficit payments currently set at £300 million per year (for the next 36 years) dwarf the company's operating profit of £39 million in 2010/11. The current deficit repayment schedule also requires the company to top up the deficit payments by a further £107 million per year between 2013 and 2023. These repayment schedules take no account of the ongoing pension contributions that the company has to fund of approximately £450 million per year.
The payments required to fund the pension deficit are unsustainable. The strain on Royal Mail's financial position does threaten the future of the company and its ability to meet the Universal Service Obligation. This is why the CWU has consistently campaigned for Government intervention on the pensions deficit. The company does not have a viable future unless this burden is removed. Furthermore, unless Government action is taken, the members of the Royal Mail Pension Plan, who have contributed in good faith towards their retirement income, will inevitably face further attacks on their benefits.
The RMPP deficit has been caused by a number of factors. Some such as increased longevity, detrimental Government legislation (affecting taxation on dividends and increased regulation) and poor investment returns are common to all funded pensions schemes. However, the Royal Mail pension deficit was also, in large part, the result of a 13 year pensions holiday between 1990 and 2003 - a period during which the company ceased to pay any contributions because the scheme was in surplus. Because the Government own Royal Mail, and took money out of the company during this period, they have a duty to make good the impact of this policy.
.
The Wider Pensions Challenge in Society Today
Successive Governments have made the case that without substantial reform future pension provision across the UK is unaffordable and virtually all pension experts recognise the fact that people are living longer, aligned to a harsher economic climate, does mean that affordability is an issue. Following the publication of the Hutton Report the Coalition Government has now focused its efforts on attacking public sector pension schemes, which are funded by the taxpayer.
The current dispute between the Unions and the Government on local and civil service pensions is going to condition the terms of pension bargaining for the whole movement - a point the CWU made at this years TUC.


Equally, the weakness of pension provision in the private sector does drag down pension provision in the public sector - only 35% of employees in the private sector have a pension compared to 85% of employees in the public sector. Where there are schemes in the private sector, 56% of defined benefit schemes are closed to new members.
For the Government, the stakes in the struggles are very high. DWP estimates that the change to CPI indexation will reduce the value of the schemes by £73.2 billion over 15 years. The Chancellor's unilateral announcement of increased employee contributions, of 3.2% of salary, will save the Government £1.8 billion a year by 2014/15. Similarly the announced increase in retirement age for scheme members from 65 to 68 years, on a phased basis, without negotiation, will also hugely reduce Government costs.
None of this means that it is not possible to improve the position in schemes where we organise. We have to adapt effective policies and tactics regardless of what happens elsewhere. But it does mean that the problems we are encountering are not going to lighten conditioned as they are by these wider clashes around pension provision.


Section 2 - The 2008 Pension Reforms

In 2008 the trustees agreed a number of changes proposed by Royal Mail designed to reduce the employer contribution and de-risk the scheme going forward.
The changes were as follows:

Closure of the existing Final Salary Scheme with effect from 1st April 2008 and its replacement with a career salary defined benefit scheme - sometimes referred to as a Career Average Revalued Earnings (CARE) scheme - from that date. For service up to 1st April 2008 pension remains based on final salary at the time of retirement or leaving the business. Pensionable service after 1st April 2008 is calculated on the basis of actual pensionable earnings in each given year up-rated by inflation (as measured by the RPI) capped at 5%. Accrual rates and employee contribution rates remained unchanged.

Increase in retirement age from 60 to 65 with effect from 1st April 2010. Pension accrued before that date can still be taken unreduced from the age of 60. Pension accrued after 1st April 2010 is subject to actuarial reduction if taken before 65.

Closure of the Defined Benefit Scheme to new starters with effect from 1st April 2008. Royal Mail Group introduced a defined contribution scheme for new starters, based on a tiered employee / employer contribution rate. New employees are not able to join this scheme until they have completed 12 months employment.

The Union did not agree these changes but in negotiation prior to the formal consultation period we were able to significantly influence the proposal in a number of areas.
Most significantly, the company's original proposal would have reduced the scheme deficit by £1.6 billion by closing the scheme at 1st April 2008 and linking benefits for service up to that date to final salary in the best of the last 3 years to that point, subsequently up-rating by RPI (capped at 5%). That aspect of the proposal was dropped by the company and service to 1st April 2008 remains linked to final salary at the point of leaving the business, at whatever time that is in the future.
The company's original intention was to up-rate the value of annual pensionable earnings after 1st April 2008 by CPI. The union sought up-rating by an RPI + mechanism. The final proposal involved up-rating by RPI.
A further very significant change to the proposal, as far as we are aware unique, was the ability to take unreduced pension at 60 on service prior to 1st April 2010, whilst remaining a contributing member of the scheme and building up additional pensionable service. Coupled with the increase in maximum pensionable service from 40 to 45 years this enables scheme members to build up a greater level of pensionable service whilst at the same time enjoying lump sum and unreduced pension on service accrued before 1st April 2010 from the age of 60.
Illustrative example of the impact of the changes
Below is a simplified illustration of the effects of the changes on a member born on 1st April 1960, joining the scheme on 1st April 1980, who turns 60 in 2020 and remains in employment up to 65:
Service before 1/4/2008
Pension is based on 28/80ths of final salary in the best of the last 3 years before turning 60 (i.e. 2017-2020)
Pension can be taken without reduction at 60.

Service between 1/4/2008 - 1/4/2010
Pension is based on 2/80ths of actual pensionable earnings in each year under CARE. This is up-rated by RPI capped at 5%.
Pension can be taken without reduction at 60.

Service between 1/4/2010 and 1/4/2025
Pension is based on 15/80ths of actual pensionable earnings in each year under CARE. This is up-rated by RPI capped at 5%.
Pension earned up to 60 (i.e. 2010-2020) can be taken early subject to actuarial reduction.



Section 3 - The Postal Services Act -The Proposed Changes to Pension Arrangements

Overview
The Postal Services Act allows the Government to take on the pension deficit in the Royal Mail Pension Plan (RMPP). Its proposal to do so is now subject to investigation by the European Commission under EU state aid rules. The transfer of the deficit cannot take place until this is granted.
The Government is proposing to transfer all current liabilities of the RMPP for service up to 31st March 2012 - for existing pensioners and both deferred and active members - to a new public sector scheme, leaving the RMPP and the liability for future pensionable service under existing entitlements with Royal Mail and Post Office Ltd (POL).
While the Act stipulates that the effect of the transfer must not worsen the solvency of the RMPP - which would allow the Government to leave the scheme with a deficit - it is proposing to leave the RMPP with around £1.5bn in matching assets and liabilities. The RMPP would therefore have no deficit at the date of transfer and Royal Mail would no longer be required to meet the current deficit payments of £300m per year. Based on the March 2010 valuation this would involve transferring £32.9bn of liabilities and £24.5bn of assets to the Government.
RMSPS - the New Public Sector Scheme
The new scheme proposed by the Government will be called the Royal Mail Statutory Pension Scheme (RMSPS). As with other public sector pensions the new public sector scheme being proposed to take on the historic liabilities of the RMPP would be 'unfunded' - the Government intends to sell off the assets over time and the taxpayer would be liable for pensions in the long-term; this is the equivalent of a Government guarantee for the liabilities.
The transfer of these past liabilities to the new RMSPS must ensure members' current entitlements are protected and the Act stipulates that provision for each member must be 'in all material respects, at least as good immediately after [the transfer]' as it was before. The Secretary of State is also precluded from making any alterations to the scheme which would worsen members' entitlements, without their prior consent.
The Act itself does not set out the details of the new scheme in relation to governance, precise entitlements for members or the consent requirements that would need to be met before any changes could be made. We have therefore held a number of meetings with officials in BIS, and have a number of ongoing workstreams with them, to take these issues forward (these are outlined in the section on ongoing work below).
The RMPP
The transfer of assets and liabilities up to 31 March 2012 from the RMPP should not directly affect members' entitlements or the governance arrangements under the RMPP scheme, which will remain with Royal Mail and Post Office Ltd going forward. The existing rules of the RMPP will therefore continue in force.
However, the RMPP will be divided into sections to reflect the proposed separation of POL from Royal Mail, which will entail changes to the governance of the scheme as discussed below.
It should be noted that while the Government is intending to transfer liabilities from the RMPP accrued up to 31 March 2012, the liabilities covered by the RMSPS from this date will be up-rated by inflation. For service up to April 2008, however, members are - and will continue to be - entitled to a pension based on their salary at retirement. If salaries rise above inflation, the excess liability to meet this salary-link will therefore remain with the RMPP.
On the one hand this could result in additional liabilities being borne by the RMPP, if salary growth outstrips inflation. On the other hand, there could be a potential 'moral hazard' created by the proposed arrangements - in short, Royal Mail could make a 'double saving' on its pension costs by keeping salary increases below the cost of living. This is one of the issues we have raised with BIS.
Issues for the CWU and ongoing work
While we have long campaigned for the Government to take responsibility for the pension deficit, in line with emergency motion E3, our aim is to ensure that Government action on this fully protects the entitlements of RMPP members. This applies to both the new RMSPS and the RMPP scheme, particularly in the event of privatisation.
The nature of the solution being proposed by the Government, splitting the existing RMPP into two, and issues such as privatisation and the separation of Royal Mail Group mean that a lot of detailed work is required to ensure this is the case. We are holding a series of meetings with the Government to address a number of issues to take this forward.
Firstly, it is important to ensure that the £1.5bn of assets left with the RMPP fully meet the remaining liabilities. Particular issues here are the quality of assets which are left with the RMPP, whether these are sufficient in light of the 'salary link' issue and the proposed privatisation of Royal Mail, which could affect the strength of the employer covenant and trustee assessments of funding requirements. Equally, we need to ensure that the segregation of the RMPP and the division of assets between the Royal Mail and POL sections is done in an equitable way.




Secondly, the governance of the schemes needs to be resolved. Because the RMSPS will be unfunded there will be no trustee board. While this is common for public sector pensions (given that there is no pool of assets to be managed on the members' behalf) the RMSPS will not be a typical public sector scheme: there will be a need to exercise discretions in line with existing entitlements and for the RMSPS to work together with the trustees of the RMPP.
As there will be no trustee board, it is important that we establish an alternative body which will ensure Union involvement. The Government have accepted that there should be Union representation on a governance board and we are in discussions about the level of representation the CWU should have, as the representative of the overwhelming majority of members.
Governance of RMPP left with Royal Mail will be less affected by the split, but the trustee arrangements need to be reviewed to reflect that only members accruing benefits after 31 March 2012 remain in this and to reflect the prospective separation of POL companies from Royal Mail Group.
Another crucial issue in relation to governance is ensuring that the two schemes - the RMPP and the new RMSPS - treat members in the same way, particularly on issues such as ill-health early retirement, discretionary benefits, the use of actuarial factors to put a value on entitlements (for instance, in the event of early retirement) and AVCs. For instance, we must avoid a scenario where only one of the schemes could agree to a member's ill health early retirement.
The prospect of privatisation also raises a number of issues in relation to the RMPP. Ongoing pension entitlements currently cost Royal Mail around £450m p/a and reducing benefits to the legal minimum contribution level would save it hundreds of millions of pounds each year. We are therefore seeking to ensure that a condition of any future sale is for existing benefits to be guaranteed as a contractual obligation.
The broad areas under discussion are: members' entitlements under both schemes; the governance arrangements for the RMSPS and how it liaises with the RMPP going forward; the administration of the schemes; the provision of full information to members, notably full documentation in relation to the new RMSPS; the transfer of assets from the RMPP to the RMSPS; the establishment of a POL section within the RMPP; and the drafting of secondary legislation in order to give effect to the above.




Section 4 - RPI versus CPI

The Government has changed the inflation measure it uses for uprating public sector pension payments, state pension increases and benefit payments from RPI to CPI as part of its broader economic strategy.
Differences in the make up of the indices and the methodology they use, means that CPI has tended to lag behind RPI by an average rate of around 0.8% per year; this has a significant effect over the longer term when considering members' pension benefits and the liabilities of public sector pension schemes.
In Royal Mail, this change has affected members of the Post Office Superannuation Scheme (Sections A/B) from pre 1987 due to a link in the terms of the scheme to the Government's Pension Increase Review Orders, stemming from the historic benchmark with civil service schemes when it was introduced.
This was not a result of the Postal Services Act and the POPS and CARE scheme were not affected by the change because the terms of these expressly provided for other measures such as RPI and earnings to be used. It is important to recognise that the proposed transfer of historic liabilities to the Government backed RMSPS will not change members' entitlements under these schemes.
In the RMPP schemes this change has the following effects:
POSSS / pre 1987 members of the RMPP (section A/B)
POPS / 1987- 2008 members of the RMPP (section C)

Pensioners
Future increases in line with CPI
Future increases remain linked to RPI*

Deferred pensioners
Future revaluation in deferment in line with CPI
Future revaluation in deferment remains linked to RPI *

Active members
Pension earned up to 1/4/08 remains linked to earnings
Pension earned after 1/4/08 (CARE Scheme) remains linked to RPI*
Pension earned up to 1/4/08 remains linked to earnings
Pension earned after 1/4/08 (CARE Scheme) remains linked to RPI*

* Capped at 5%
The change will have a significant financial impact on the benefits members of the POSSS receive in retirement and the Union opposed this change. While the POSSS had a link to the inflation measure being used by the Government, Royal Mail did have the option to protect members' benefits but chose to ignore this.
The move to CPI is a change affecting people throughout the country, particularly public sector employees who have had their pensions unilaterally changed, but also for significant numbers of employees in private sector DB Schemes. As such, while raising this issue with Royal Mail and the pensions trustees, we need to work in tandem with the TUC to address this.


Section 5 - How does CWU fit into the Public Sector Pensions Dispute

It is important that we clarify exactly where the CWU sits within the current Government/public sector dispute and the wider TUC campaign.
Firstly, we are not and neither can we be part of the legal trade dispute that exists between the Government and public sector Unions for the following reasons:-
- While the Royal Mail Group provides a public service it is not formally part of the public sector. The GPO was abolished as a Government Department in 1969 and became a statutory corporation. In 2001 as part of the 2000 Postal Services Act, the Government created a further arms length relationship when Royal Mail became a public limited company.


- As far as pensions are concerned our link with the civil service ended in 1969 when the Royal Mail Pension Plan was first introduced.


- The pension schemes currently at the centre of the public sector dispute are predominantly unfunded i.e. they are not dependant on employer contributions or investment returns, but are instead funded directly by the taxpayer.


- For the reasons outlined above when the Government introduced changes to public sector schemes between 2005 and 2008 (commonly known as the Johnson Deal) the RMPP was never part of this debate.


- The new public sector scheme now being created by the Postal Services Act 2011, to cover the accrued benefits of active, retired and deferred members of the RMPP, is under the Act completely ring fenced from other public sector schemes. The rules under which it operates will be confirmed in secondary legislation and these cannot be altered without further new legislation.


- Given that most public sector schemes have always been unfunded, they have developed in a different way to the RMPP and as such have had the security of being protected by the Government. In these circumstances it is difficult to make direct comparisons between all the issues involved in the public sector dispute and where we currently are with the RMPP. For example, while the Government's proposal to move public sector employees from final salary to CARE Schemes essentially mirrors the Royal Mail Group 2008 Pension Reforms, the imposition of increased employee contributions (3.2% now and future incremental increases) and the planned linkage between pension scheme retirement age and the increase in state retirement age, differ from the RMPP. Similarly, while CPI affects all public sector employees, in the RMPP it affects those in post before the 1987 pension changes.
However, although there is not direct involvement in the public sector dispute, the outcome of this dispute is bound to set the context for the future direction of pension schemes in both the public and private sectors. The CWU made this point when supporting the Composite Motion at the Trade Union Congress which covered both the public sector dispute and the broader TUC campaign on improving pension provision across the UK.
There is no doubt that all employers will be looking at the various recommendations of the Hutton Report and the outcome of the public sector dispute to target new areas where they believe they can reduce future pension costs. For us this will be particularly relevant in the areas of further increases in retirement age and the potential for significant increases in employee contributions. As far as the public sector dispute is concerned the CWU must show solidarity in any way we can and actively engage in the broader TUC Campaign to protect all workers' pensions.
In terms of moving forward Emergency Motion 3, we do not rule out that we could be involved in our own trade dispute. On this basis we should continue to monitor and review the public sector situation as developments occur.


Section 6 - Pensions - The Link to EU State Aid and Privatisation

From the publication of the final Hooper Report and throughout our 'Keep the Post Public' Campaign, which has spanned two Governments, through to the Postal Services Bill becoming an Act of Parliament, the Union has maintained strong opposition to privatisation but support for the removal of the pensions deficit and changes to regulation.
During this period we have been unable to break the link (between privatisation and action on the pensions deficit) that the Government has insisted must underpin the whole approach to the Postal Services Act. For some in the CWU this linkage has presented a continuing dilemma. Some may believe that we would be best served to oppose the Government's State Aid application in the hope that this would derail privatisation. However, this would not be the case; we do not accept the Government's link, but neither would blocking state aid solve our problems.
The CWU have made and published to Branches a comprehensive submission to the consultation on EU State Aid, fully covering our views and concerns on the process and range of possible outcomes. The financial position of Royal Mail means that it is unable to meet the cost of the deficit going forward and this needs to be taken on by the Government. If state aid is not granted or granted at a reduced level insufficient to fully fund the transfer of historic liabilities, there would be far harsher consequences. Royal Mail would be unable to meet its liabilities and would face potential insolvency and the prospect of going into administration. In these circumstances, the pension scheme could be wound up, thus still removing a barrier to privatisation without securing our members' pension entitlements.
The Postal Executive believes we must face up to the industrial realities of the overall situation and that it is not inconsistent to oppose privatisation whilst continuing to support the pension deficit being removed. Even if state aid is granted in the current financial climate it is not a certainty that a sale would go ahead and we continue to engage with Government over future ownership of the company.
We therefore believe the Policy Forum should reaffirm our support for the Government taking on the pension deficit.


Section 7 - CWU Policy Going Forward

The previous sections of this report highlighted the full range of issues that are affecting the future pension provision of CWU members.
In this section we propose clear policy lines designed to address the major challenge of pensions.
A credible pensions policy cannot be developed in isolation from the other major issues facing the Union. It must take full account of the environment the Royal Mail Group now operates within and recognise the scale of the wider pension debate facing society today.
In developing our policy we must gain an improved understanding of the value of what we still have, as we strive to maintain and where possible, improve the pension entitlements of our members.
It is essential we now move the Union beyond the 2008 debate with a forward looking policy that has realistic aims in the short, medium and longer term.
Our immediate objective must be to ensure that with the changes proposed under the Postal Services Act, all members of the RMPP get the benefits to which they are entitled without further detriment. This means being certain that what is proposed in the Postal Services Act will not disadvantage members. It also means being convinced that the proposal can work for many years and that sufficient safeguards are in place to ensure the ongoing RMPP has enough remaining assets to pay for future benefits.
In recent months, there have been a number of meetings with the Government to discuss the detailed pension arrangements under the Postal Services Act. To assist in these meetings the Union has enlisted the support of independent pension experts. The Government's proposals are now at an advanced stage and the Government are fully aware that the Union is seeking a number of written assurances, some of which will be built into secondary legislation. The trustees of the scheme are engaged in their own detailed discussions and they have the ultimate legal responsibility to ensure the suitability of the final arrangements.
From what we have learnt to date, there is no doubt that the new ring fenced public sector scheme will provide greater security for the accrued benefits of all active, deferred and retired members of the RMPP.
The real issue is whether or not the remaining RMPP Scheme will have sufficient assets to fund future benefits including the final salary link. Furthermore, whether that in the event of a sale a new employer would remain committed to maintaining the level of today's pension provision. This is why the first part of our policy is to try and address these issues before any changes take place.
The second part of our policy is about prioritising, in the short to medium term, the need to improve the current Defined Contribution Scheme that applies to new entrants from 2008. In line with existing Annual Conference Policy, the approach we are advocating is to provide these members, in the future, with a route back into the superior Defined Benefit CARE Scheme. Not only is this the right policy for these members, but given that over the years they will become the majority, this is an essential policy to protect the existing CARE Scheme arrangements.
The other area we want to prioritise in the short to medium term is the reversal of the Government's decision to up-rate pensions with CPI rather than RPI. To achieve this policy we will need to adopt a two pronged approach. As well as pursuing this directly with the company, we will need to get fully behind the wider TUC Campaign and any legal position that calls for a judicial review.
Although we are prioritising the aforementioned for improvements we must recognise that they come with significant price tags likely to be well in excess of £1 billion.
The remaining areas of our policy focus on the need for new mechanisms to counter the fact that in today's society pensions will become more of an issue, more often. Going forward our task is to ensure that pensions has a constant and higher profile within the company and that the Union can influence pension policy at the earliest possible juncture. Developing this type of thinking is essential to shift the focus away from affordability and back to decent pensions being seen as good employment practice to attract employees who want a long term stake in the company.
There are two new initiatives we are proposing that would help shift this balance and arguably put the CWU at the cutting edge of future pension strategy.
Firstly, as part of our overall aim to change the governance model of the company (Emergency Motion 3) we should seek to establish an agreement on a new RMG/CWU Joint Pension Board. This would have an agreed Terms of Reference that would give the new board overall responsibility for pension policy across the company, alongside a stated objective of maintaining and improving pensions entitlements.
Secondly, we should challenge the current thinking of the Government and the employer over employee ownership models. While the CWU will continue to oppose privatisation, the Union must also deal with the industrial impact of these
policies and we cannot accept the Government and the company imposing their form of employee ownership on the workforce. In the event of privatisation, we should mitigate the impact by ensuring that any employee ownership model is confirmed as a trust with no ability to trade shares internally. Instead, we should promote a scheme whereby any benefits or dividends could be transferred into improved pensions with matching employer support. In this way we would not only challenge traditional privatisation principles, but we would also be asserting the subject of pensions as a priority for all stakeholders.
Finally, our proposed policy recognises the importance of the whole of the CWU getting behind the public sector dispute and wider TUC Campaign by showing solidarity where we can and actively engaging in campaign activities.
The detailed CWU policy being proposed at the Policy Forum on the 10th November is as follows:-

The Postal Services Act - The New Public Sector Scheme and the remaining RMPP.

1.1. The CWU recognises that the setting up of a new ring fenced public sector scheme, with the right assurances, will provide greater security for the accrued benefits of active, deferred and retired members of the existing RMPP.

1.2. In order to provide confidence to CWU members about the longevity of these new arrangements, the Union will seek written assurances from the Government and/or the Royal Mail Group (as appropriate) on the following issues prior to any changes being made.




Confirmation that what is being proposed under the Postal Services Act will not disadvantage in any way the benefits members are entitled to.



Confirmation that the Union will be directly involved in the governance of the new public sector scheme, with the ability to exercise discretions and co-ordinate benefits and decisions with the trustees of the RMPP.



Confirmation (validated by independent pension experts and lawyers) that the split of assets will leave the RMPP fully funded and deficit free going forward with sufficient assets to fund future benefits. This also needs to ensure that the split of assets setting up a POL section is fair and equitable.



Confirmation that the new public sector scheme is ring fenced and cannot be changed by a Government without the consent of the members and further legislation.



Confirmation that in the event of a sale any new company will not be allowed a contributions holiday or to benefit from any windfall profits.



Confirmation that members will continue to receive the full value and protection of the final salary link at time of retirement for pensionable service up to 1st April 2008.



Confirmation that in the event of any sale where future salary increases were to be below inflation, members should be allowed to keep any excess benefits from the new public sector scheme i.e. there should be no corresponding offset from future accrual in the RMPP.



A guarantee that going forward the RMPP will continue to operate as a defined benefit scheme under the CARE arrangements. The Union should seek to secure such a guarantee by making this a contractual obligation with the employer.



A guarantee that if mutualisation takes place in POL all pension entitlements will be protected.



Prioritising Improvements to Existing Pension Arrangements

The CWU will target the following areas for improvements.




Increased employer contributions to the Defined Contribution Scheme (new entrants from 2008). The ability for members of the scheme to be able to join the Defined Benefit CARE Scheme, thus moving away from two-tier pension provision amongst employees.



The reversal of CPI as the measure for up-rating of pensions and the reintroduction of RPI for the affected members.



New RMG/CWU Pension Board

As part of a new governance model the Union should seek an agreement to the introduction of a new Joint RMG/CWU Pensions Board which would have overall responsibility for future pension policy.



Pensions linked to Employee Ownership

In the event of a Government sale, the Union should secure an agreement whereby any Employee Ownership Scheme is confirmed as a trust (no internal trading of shares) with the ability to transfer dividends and benefits into improved pension arrangements.



The Public Sector Dispute and TUC Pensions Campaign

The CWU should actively engage in the broader TUC Campaign to improve pensions for all workers and offer solidarity to the public sector Unions in any way we can, whilst highlighting inadequacies of private sector schemes and opposing any moves to raise the retirement age beyond 65. We should continue to review and monitor the public sector dispute in conjunction with our own discussions as developments take place.



Section 8 - Summary and Recommendations

This report is designed to provide good quality information on the full range of pension issues and set out the pensions policy that CWU will pursue going forward.
We are proposing the following recommendations to the Pensions Policy Forum on the 10th November.
Recommendation 1: The CWU reaffirms its support for the Government to take over responsibility for the RMPP pensions deficit, notwithstanding the concerns raised by CWU in our submission to the European Commission. The CWU recognises this as a key enabler to maintaining and improving employee pensions whilst providing financial stability for the company.


Recommendation 2: That the Policy Forum endorses Section 7, Paragraphs 1 to 5 as CWU Pensions Policy.


Appendix A - Pension Plan Membership Figures as at 30th June 2011

Pension Plan Membership Figures
Based on Plan Administrators' records as at 30 June 2011
Royal Mail Pension Plan
Section A/B Section C Total
Active 23,385 99,878 123,263
(inc. POL 1,420 4,077 5,497)
Active/Pensioner 1,925 2,392 4,317
(inc. POL 87 184 271)
Deferred 34,181 84,170 118,351
(inc. POL 4,563 4,692 9,255)
Deferred/Pensioner 305 336 641
(inc. POL 16 19 35)
Pensioner 147,379 36,341 183,720
(inc. POL 8,052 2,691 10,743)
Royal Mail Defined Contribution Plan
Active 11,780
(inc. POL 671)
Deferred 37
(inc. POL 5)
Dear Colleague
Further to LTB 811/11, amendments are now open and will close at noon on Wednesday 26th October 2011.
Branches and Business Co-ordinating Committees can submit one amendment to each recommendation.
Email: postalpolicyforum@cwu.orgusing the attached Amendment Form.
The amendments and order of business will be sent out on the 27th October 2011.
Please note the venue for the Policy Forum has changed name from the Ramada Jarvis Manchester to Mercure Manchester Piccadilly Portland St Manchester M1 4PH.
Regards

Jane Loftus
President/Postal Executive Chair

COMMUNICATION Postal Policy Forum November 2011
WORKERS

UNION
For Head Office use only

Name of Branch/Business Co-ordinating Committee:
Branch Ref No:

AMENDMENT TO RECOMMENDATION:
Date of Meeting:
Name:
Branch Secretary/Field Official

NOTES
1 Please refer to guidance notes issued with LTB 811/11.
2 Use a separate sheet for each amendment..

Name:
Chair
EMAIL :
TELEPHONE NUMBER:

MOTIONS MUST BE RETURNED BY
26th October 2011 at 12 noon

If by post, to Jane Loftus Chair PEC, CWU, 150 The Broadway, Wimbledon, London SW19 1RX if electronically to: postalpolicyforum@cwu.org

ADDRESS (BLOCK LETTERS)


Postal policy Forum November 2011


More info +


To unsubscribe from this newsletter, click here.

[Midge]

You can download the PEC Report for the Policy Forum from the link below.

11LTB863_PEC_SpecialReport_Pensions.zip

[randompostman]

So the Union bosses at HQ have given branches 15 days to share with the membership ask for amendments from the members have a branch meeting to vote on them and then send them in? Looks like we have been SOLD OUT AGAIN!