How long before the CDC is ditched?

[Trumanity]

If they are attacking all of our other terms and conditions why stick with the CDC?
They have torn up the PTC agreement. Who is to say that they won't just offer NEST!

[RobertT]

It's always a possibility.

But none of the CDC legislation would have been put in place if it wasn't for the decision to go that route during the 4 Pillars negotiations.

From a financial point of view it could knock a big chunk off RM's pensions bill.

Legally all UK employers have to offer a pension scheme which has a total contribution level of at least 8% of pensionable pay, which is split 5% employee, 3% employer.
Contributions into CDC will total 19.6% of pensionable pay, which is 13.6% from RM and 6% from us.

CDC will have an approximate cost of £400 million per year to RM, which is roughly the same as now. So any decision to revert to the minimum 3% contribution would mean an annual saving of over £300 million for them.

Personally I can't really see RM saying, 'oh sorry we don't want to do it anymore', after 4.5 years of planning and legislation, etc. But I wouldn't be surprised if it's one of Simon Thompson's wet dreams!

The 1st August should see the next milestone in the legislation process, which will enable any employer to apply to start a CDC scheme. viewtopic.php?f=27&t=105239

We haven't got long to wait to see if RM do.

[heapsy]

Some months ago I read an article in a finance column regarding CDC. Unfortunately I can't remember which one. I can remember that it said a major share holder in RM was very disappointed at the level of contributions that RM would be making. So I predict it will be watered down, like section C pensions have, and continue to be.

[RobertT]

They've probably looked at every way to save money in RM, including pensions. But they've decided to go for sick pay, pipeline costs, etc for now.

Considering the legislation was largely tailored specifically for the RM scheme, I don't think there's much chance of them pulling the plug before it starts. It would make them look amazingly stupid!

My personal prediction is that CDC will last for 5-10 years and then they'll decide it's too costly and it'll close. Probably being replaced by a DC scheme with much lower contribution levels.

[Jaggs]

They've probably looked at every way to save money in RM, including pensions. But they've decided to go for sick pay, pipeline costs, etc for now.

Considering the legislation was largely tailored specifically for the RM scheme, I don't think there's much chance of them pulling the plug before it starts. It would make them look amazingly stupid!

My personal prediction is that CDC will last for 5-10 years and then they'll decide it's too costly and it'll close. Probably being replaced by a DC scheme with much lower contribution levels.

Robert, do you think that the CDC scheme could be run at lower contribution rates? I would imagine there is a level of contributions that actuaries/pension specialists would probably say a CDC scheme wouldn't work so would be better off as a DC scheme.

[RobertT]

Robert, do you think that the CDC scheme could be run at lower contribution rates? I would imagine there is a level of contributions that actuaries/pension specialists would probably say a CDC scheme wouldn't work so would be better off as a DC scheme.

I think I read somewhere that a membership level of lower than about 5,000 would make CDC schemes unworkable due to economies of scale, etc. So in theory, lower RM contributions could be worked around because of the number of employees and the amount of money involved.

However, lower RM contributions would also mean a lower accrual rate and potentially a higher NRA, or else increased employee contributions to compensate.
All of which would make it less attractive to the members.

So in my opinion, any decision of RM's to cut the contribution levels would mean the end of CDC and the only other alternative would be individual DC. Which is what RM wanted back in 2017 when they first announced the RMPP would be closing to future accrual.


*The longer term plan is to legislate for multi-employer CDC schemes, meaning smaller companies could offer this type of pension too.

[Woody Guthrie]

I think if Royal Mail could they would ditch the whole idea but they've expended a lot of political and financial capital getting to this point so shelving it would be an embarrassing about face.

Not that this would stop them if they genuinely think it's now financially unworkable or just too cumbersome to administer.

I doubt they would go ahead with it at a reduced contribution rate, given the choice most members would opt for an individual DC if the contribution rate was the same.

[Trumanity]

International Distributions Services Plc.,....and still no news of CDC scheme implementation. The silence is deafening.

[Trumanity]

No mention of CDC scheme in new entrants' contracts. Only Scottish Widows DC scheme. Is the CDC scheme dead in the water now?

[RobertT]

No mention of CDC scheme in new entrants' contracts. Only Scottish Widows DC scheme. Is the CDC scheme dead in the water now?

No mention of CDC being ditched as part of RM's cost cutting measures either!

The trustees have applied to the pensions regulator and it's now up to them.

https://www.myroyalmail.com/collective-plan

New entrants won't be able to join CDC until they've been in the job for 12 months!

[Trumanity]

No mention of CDC scheme in new entrants' contracts. Only Scottish Widows DC scheme. Is the CDC scheme dead in the water now?

No mention of CDC being ditched as part of RM's cost cutting measures either!

The trustees have applied to the pensions regulator and it's now up to them.

https://www.myroyalmail.com/collective-plan

New entrants won't be able to join CDC until they've been in the job for 12 months!

You well know that none of that is the real cost. Why would they go ahead with an expensive launch for a depleting workforce, which will be increasingly self employed?

[Woody Guthrie]

Personally I think this is dead in the water.
It's a long term commitment to an employee model the business no longer sees as the way forward.
To start it now means from day one the scheme would be effectively circling the drain.

[RobertT]

You well know that none of that is the real cost. Why would they go ahead with an expensive launch for a depleting workforce, which will be increasingly self employed?

I can't tell you why they're not ditching it, as from a financial point of view it would save the company over £300 million per year, compared to an individual DC scheme offering the bare minimum contribution rate.
With even more savings with a heavily self employed workforce.

But from the info we know, they are still going ahead with it!
There's been nothing from RM or CWU to the contrary!

I'm not sure they would bother applying to start a CDC scheme, if they weren't planning on doing so. I also suspect the pension side of things is separate from Simon Thompson's frontline operational budget.

Although, I've said before on this forum, that I don't think it'll last more than 10 years before they decide it's too expensive.

[Trumanity]

You well know that none of that is the real cost. Why would they go ahead with an expensive launch for a depleting workforce, which will be increasingly self employed?

I can't tell you why they're not ditching it, as from a financial point of view it would save the company over £300 million per year, compared to an individual DC scheme offering the bare minimum contribution rate.
With even more savings with a heavily self employed workforce.

But from the info we know, they are still going ahead with it!
There's been nothing from RM or CWU to the contrary!

I'm not sure they would bother applying to start a CDC scheme, if they weren't planning on doing so. I also suspect the pension side of things is separate from Simon Thompson's frontline operational budget.

Although, I've said before on this forum, that I don't think it'll last more than 10 years before they decide it's too expensive.

10 years is optimistic. I hope you are right...EVRI use this: https://www.smartpension.co.uk/

[RobertT]

10 years is optimistic. I hope you are right...EVRI use this: https://www.smartpension.co.uk/

Which is a DC pension, basically the same as many others.