ROYAL MAIL PRESS RELEASE - Decision On Pension Plan Reform

[TrueBlueTerrier]

http://www.news.royalmailgroup.com/news ... mail_group

03/03/2008


Royal Mail has announced the outcome of its consultation on changes to its pension plan - 12 months after first proposing amending the scheme.

The changes follow extensive talks with unions and employee representatives since last April, which resulted in major changes to the original proposals, followed by a formal consultation with every employee member of the pension plan lasting more than 60 days from last November to mid-January this year.

Royal Mail reiterated the announcement made last autumn that both the CWU and Unite had agreed to support the changes as part of wider agreements with each on pay, modernisation and pension reform.

Jon Millidge, Royal Mail’s Interim Group HR Director, said: "Funding the pension plan is a huge challenge because of increasing longevity and the higher costs of providing a pension plan but Royal Mail is determined to ensure postmen and women get the best possible pension plan that the company can afford. We already have signed, written agreements with the CWU and Unite which cover pay, flexibility and support for our pension reform, which we fully expect them to honour. The CWU agreement was facilitated by Brendan Barber, General Secretary of the TUC."

Details of the changes to the plan are being sent to every employee. The key points are:
• All pension benefits earned before 1 April 2008 will be protected and linked to final salary at the time of retirement.
• Employees can continue to take their pension on reaching 60 but the normal retirement age will increase to 65 from 1 April 2010. It will be possible to draw a pension at the age of 60 and continue working while still contributing into the pension plan until the maximum level of contributions has been reached.
• From 1 April 2008, benefits building up for employee members of the plan will be earned on a Career Salary basis.
• The plan will close to new members from 31 March 2008.
• A new defined contribution scheme will be launched in April 2009 and new recruits joining the company after 31 March 2008 will be able to join it after they have worked for the company for a year.

The increasing cost of maintaining the pension fund comes as Royal Mail faces intensifying competition in the open postal market with one in five of all letters now collected by rival companies, while mail volumes fall and electronic communications increase. Tackling the pension fund challenge means Royal Mail is currently making annual payments of around £850 million to cover both ongoing contributions and the funding of the pension fund deficit - one of the largest faced by any UK employer - over 17 years.

Mr Millidge said: "The changes we’ve made to the pension scheme have been driven overwhelmingly by the fact that people today are living longer and the costs of providing a pension fund have risen substantially. Even if the fund had not been in deficit, Royal Mail would still have faced making changes to the pension plan."

He stressed: "These changes have only been decided after very lengthy discussions with the unions - the CWU and Unite - and after taking careful account of the views expressed by individual employee members of the fund. We first announced our intention to consult on changes 12 months ago and the length of time taken to reach a decision underlines the importance Royal Mail attached to engaging its people in a full discussion of all the options available."

Ends

Issued by Royal Mail Group
148 Old Street
LONDON
EC1V 9HQ

Notes to Editors
• Royal Mail’s discussions with the unions and in a company-wide Consultation Forum, prior to formal consultation, resulted in changes to the company’s original proposal, including:

- Pension benefits earned before April 2008 will be untouched so that the pension for all service before this date will be linked to final salary at the time of retirement.
- Removing a proposed cap that limited growth in pensionable pay to RPI, recognising in particular, the impact of such a cap on younger people, in favour of a career salary defined benefit approach.
- Postponing change to the normal retirement age from 2008 to 2010.
- Allowing people to take their pension in two parts - with pension accrued before 2010 taken at the age of 60 while members can continue to work and accumulate further pension to be taken at the amended retirement age effective for benefits earned after 2010.

• In addition, the decision announced today includes changes made following a formal consultation of more than 60 days during which more than 30,000 responses were received via a dedicated helpline, email, postcards and letters, all of which have been carefully considered by the company. The changes include:

- A mechanism to allow individuals to pay more than the standard 6% contribution into the plan, building up a higher, index linked, pension with no risk to the individual.
- An increase in the current 40-year limit on contributory service to 45 years.

• The 60-day formal consultation involved a detailed booklet being sent to every employee, together with the offer to individuals of a personal illustration to show how the proposed changes would affect them personally.

• Royal Mail’s contribution to the pension fund currently amounts to the equivalent of 30% of pensionable pay, comprising 20% for future pension costs and 10% for the pension fund deficit. The cost to Royal Mail has risen rapidly in recent years - the company’s contribution to the fund amounted to 18% just 2 years ago. After the changes, the company anticipates continuing to pay contributions at a high percentage of pensionable pay - around 21%.

• Employees belonging to the pension plan continue to pay 6% and they are not required to pay a higher contribution under the changes announced today.

• The Career Salary mechanism for calculating pension benefits from 1 April 2008 means that a separate block of pension will be earned for each year based on the relevant fraction of pensionable pay (1/60th or 1/80th). Each annual block will then increase by inflation - as measured by the RPI up to a maximum of 5% - as the employee works his or her way towards retirement. One feature of the Career Salary approach is that unlike a final salary plan, people are not penalised if they earn less as they prepare for retirement, for example, by working, if they choose, fewer hours.



www.royalmailgroup.com

[Phantom]

Its absolutely disgusting. They took the pension payments from staff over the 17 year period, we didn't get a choice! The government and royal mail should pay that money back. How do we really know there is a shortfall anyway??? do we take royal mail's word for it??? coz they've never lied to us have they!!! Everybody out.

[k979aaa]

For it is our pension and not royalfail's for if the two muppet's from up on high cannot manage's too find or argue the case for the funding of our pension for which we have paid for and not took a (pension hoiliday for where is my hoiliday no you must work five years longer)!.FOR THIS IS PART AND PARCEL OF OUR TERM'S AND CONDITION'S IT IS NOT FOR NEGOTATION WITH OUT OUR CONSENT!. IT IS NOW VITAL THAT WE ALL ACT AS ONE FOR THIS IS FOR NOT JUST YOUR FUTURE BUT FOR YOUR CHILDERN'S AND THIER CHILDERN'S AS WELL!.

[Stormproof]

[center]EVERYBODY OUT[/center]

[DGP1]

It looks like I'll have to dig the gas BBQ out of the garage

[Phantom]

The new pension "reform" will not work in the long term due to part time staff on 20hr contracts not paying in and not lasting the full 12 months. How many people will come and go on a 20hr contract within 12 months????? Thousands across the UK. So the reality is the pension pot will get worse under these employment terms as staff rentention will be extremely low from now on. Every member of staff needs to contribute 6% of their wages for it to be sustainable but this will never happen from now on if they get their own way.

:cfo :lfo - but these two bastards will be alright won't they lads n' lasses.

Everybody out!!!