CDC legislation update

Post by **RobertT** » 28 Jun 2020, 19:02

According to www.parliament.uk, the report stage is due to start on Tuesday 30th June. It's the 4th of 12 stages before the pensions bill becomes law.

Post by **freespeech** » 29 Jun 2020, 05:43

RobertT wrote:According to www.parliament.uk, the report stage is due to start on Tuesday 30th June. It's the 4th of 12 stages before the pensions bill becomes law.

Any idea of eventual timescale? A third the way through after two years doesn't bode well.

Post by **stephen500** » 29 Jun 2020, 13:57

Just hoping it does not come in before Nov 1st, as if it does not I will get £750 for advice. personally I can't see it coming in till next financial year and the CW RM trustee told me, he can't see it coming in till at least next year.
"until the new cdc scheme is introduced" to me means I am probally safe for the £750 payment. Ie I plan to leave early Dec and I doubt it will be introduced before then.

Post by **RobertT** » 29 Jun 2020, 14:04

The timeline so far:

Early 2018 – RM and CWU agree to introduce a CDC scheme as part of the 4 Pillars agreement.
During 2018 – Various meetings take place with the pensions industry and the pensions select committee.
Late 2018/early 2019 – CDC pension consultation takes place, the result being the government will introduce legislation. Queens Speech expected in May 2019.
Late 2019 – Queens Speech formerly announces plans to legislate, 6 months later than expected.
Early 2020 – Second Queens Speech(following general election) again announces plans to legislate.
Early 2020 – Legislative process begins.
March 2020 – Process is up to stage 3 of 12 and Coronavirus hits.

In my uneducated opinion, the legislation should be in place by the end of 2020 or beginning of 2021, assuming no more setbacks. With a RM CDC scheme being in place by April 2021 at the earliest.

NWpostie · Post by **NWpostie** » 29 Jun 2020, 14:57

I wonder what will happen to the current bonusplan and flexiplan contributions.

Would it stop completely or be transferred to a new stand alone AVC type plan ?

So many questions as we've already gone from final salary, Defined Benefit then Defined Contribution now this new scheme, I'm trying to keep up with it all.

Post by **stephen500** » 29 Jun 2020, 16:58

NWpostie wrote:I wonder what will happen to the current bonusplan and flexiplan contributions.

Would it stop completely or be transferred to a new stand alone AVC type plan ?

So many questions as we've already gone from final salary, Defined Benefit then Defined Contribution now this new scheme, I'm trying to keep up with it all.

Good luck, I am glad I should be out of here by then.

renrag40 · Post by **renrag40** » 29 Jun 2020, 23:29

All the major changes to pension entitlement from
1987- closing of Section B to new entrants and the introduction of Section C.
2008- closing of Section A, B and C to further accrual.
2010- moving of NRA 60 to NRA 65.
2014- removal of the link between actual pay and pensionable pay.
2018- closure of further accruals to the career average pension scheme.
Have one thing in common ...... they were all brought in at the start of April in that year. Probably because that is the start of the tax year and is easier for RM to deal with.
So if the CDC scheme doesn't come in next April then it more than likely wI'll not make an appearance until April 2022. This may still be an ambitious target date. I read an article a while back and in it was a survey of pension experts and advisors of which the majority didn't think CDC pensions would be widely available until 2024 and that the vast majority of employers would NOT be interested in changing over from their present DC pension schemes.

Post by **RobertT** » 30 Jun 2020, 04:41

renrag40 wrote:All the major changes to pension entitlement from
1987- closing of Section B to new entrants and the introduction of Section C.
2008- closing of Section A, B and C to further accrual.
2010- moving of NRA 60 to NRA 65.
2014- removal of the link between actual pay and pensionable pay.
2018- closure of further accruals to the career average pension scheme.
Have one thing in common ...... they were all brought in at the start of April in that year. Probably because that is the start of the tax year and is easier for RM to deal with.
So if the CDC scheme doesn't come in next April then it more than likely wI'll not make an appearance until April 2022. This may still be an ambitious target date. I read an article a while back and in it was a survey of pension experts and advisors of which the majority didn't think CDC pensions would be widely available until 2024 and that the vast majority of employers would NOT be interested in changing over from their present DC pension schemes.

The RMPP pension year starts on 1st April which is why changes always happen on that date, although the change from section A to B for new entrants was actually on 1st December(1971)! It's also why our annual illustrations are dated 31st March.

I agree 1st April would probably be the best date to introduce CDC, but as it's going to be a completely separate scheme, does it have to be that date? In my opinion, no!

Then you have the theoretical scenario of the pensions bill getting royal assent on 2nd April. Are RM going to wait a whole year to introduce CDC?
Considering their stated aim of 'offering a CDC pension for over 140,000 employees as soon as possible'. Personally I don't think so!

I don't see the relevance of the tax year considering that runs from 6th-5th April!

RM are the only company actively planning on introducing a CDC pension scheme, as far as I'm aware. The legislation, is to some extent, being tailored to our scheme, and that's been mentioned during the consultation and legislative process.

Ultimately we'll just have to wait and see what happens.

renrag40 · Post by **renrag40** » 30 Jun 2020, 18:04

I’ve got a feeling..... and it’s only a feeling that when the legislation is passed will be not that consequential to when the CDC pension starts. I think RM will want to row back on their contribution level and that is when the horse trading will start...... and horse trading takes time. The reasons why? Activist investor discontent over pension contributions , RMs balance sheet and the Covid 19 effect....... all reasons why they will want to pay as little into the pension scheme as they can get away with. Reducing their contributions is a “hidden” saving........ it will not cost anyone their job and the vast majority of postmen/women don’t think about their pension provision from the start of the year until the end of it. So in some respects it’s an easy target for RM to go for to bolster their finances..... if they reduce their contribution level from 13.6% to 10% they will save approximately £100,000,000 ..... which will go straight to the bottom line..... hey presto their balance sheet looks a lot better.
Time will tell.

Post by **RobertT** » 30 Jun 2020, 19:20

The problem with reducing contribution levels into the CDC scheme is that will have an impact on the accrual rates and the whole scheme will have to be re-looked at root and branch. Having spent a long time planning it the way it is, personally I can't see that happening.

A more likely scenario to improve RM's balance sheet would be a reduction in the USO, which would have the effect of them trimming the workforce by more than they originally planned via the the already announced parcel strategy.

That would mean less wages, less employer NIC's, less pension contributions, less uniform, etc. I would suggest that would add up to a lot more than your £100 million.

Post by **RobertT** » 12 Jul 2020, 18:30

The 5th stage of the Pensions Bill is due to take place on Wednesday 15th July.
It's the third reading in the Lords and a final chance for them to amend it before it passes to the House of Commons for their first reading.

Woody Guthrie · Post by **Woody Guthrie** » 12 Jul 2020, 19:16

Depending on the financial position of the company and who its major shareholders are we may see major changes to what was proposed or even a decision by the business that the whole thing is too cumbersome compared to the existing DC scheme and not worth the risk.

Everything and nothing is on the table at the moment.

Post by **RobertT** » 12 Jul 2020, 19:47

RM originally wanted to put everyone in the DC scheme and that would still be the easiest from the companies perspective. But there is no additional financial risk to the company with CDC compared to individual DC, they just agree to put in an £x amount upfront with both options.

The official RM line is still that they're going to bring in CDC when the legislation is passed.

Personally I fully expect CDC to happen, but ultimately we'll have to wait and see.

heapsy · Post by **heapsy** » 12 Jul 2020, 21:15

RobertT do you think there is even the slightest chance that RM will just use the existing or new DC scheme with the addition of the existing Cash Balance scheme for lump sum purposes? It seems to me that this would probably be the most likely of outcomes.

Post by **SpacePhoenix** » 12 Jul 2020, 21:26

I thought that bills start in the Commons, it gets read and amendments made before going to the Lords where it gets read and amendments made, going back and forth between the Commons and the Lords until no more amendments are made or the Parliament Act gets used