Royal Mail, union still 'long way to go' on new pension plan

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The government has said that Royal Mail and its union have a “long way to go” before their plans to introduce a groundbreaking new retirement fund for 140,000 workers can move forward.

Speaking at a conference in London, Guy Opperman, the pensions minister, said that he had met with the Royal Mail and CWU officials on Monday to discuss their joint proposal to offer workers a new type of risk-sharing retirement fund, not yet possible under the UK’s legal framework.

Royal Mail and its union reached agreement to push for the “collective defined contribution” or CDC plan following Royal Mail’s decision to close its traditional “defined benefit” pension plan, with 100,000 members.

Royal Mail staff are currently placed into a defined contribution pension plan, where employees individually shoulder all the investment risk for building their pension pot with no certainty about what they will get when the retire.

But unions argued for members to be offered a CDC plan, operating in some overseas countries, where risk is shared among members and members offered a “target” income in retirement.

The government needs to make changes to legislation to allow these CDC pensions to be offered to UK workers.

Mr Opperman told delegates at the TUC conference he’d had “very productive” meeting with CWU and Royal Mail officials about their proposal, and that “some people say there can potentially be advantages” with CDC schemes, over the current DC option.

“I want to say that the meeting was very positive but both parties have a long way to go,” said Mr Opperman.

“While it is still early days I am hopeful that this work clearly shows that the government can work with employers, unions and others to deliver good outcomes for members in retirement.”

However, Mr Opperman said only the CWU and the Royal Mail had come to government to “make the case” for the necessary changes to be made to allow CDC schemes in the UK.

Speaking at the same conference, Ray Ellis, assistant secretary for the CWU, said the union and Royal Mail were united in wanting to offer workers a better pension than saving individually into DC.

“Having reached an agreement, a difficult agreement, we and Royal Mail are joined at the hip,” said Mr Ellis.

”Both of us are committed to doing what we need to do to get this legislation through.”