Royal Mail Union Threatens Strike to Protect Pension Plan

[TrueBlueTerrier]

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Royal Mail Plc workers could go on strike to protect their pension plan after the operator of the U.K. postal service said it might not be able to keep the program running beyond 2018, a union leader said.

The company failed to consult the Communication Workers Union before sending a letter to employees in June that said the pension plan had become unaffordable and might have to be scrapped in two years, union deputy general secretary Terry Pullinger said. The union will take “the strongest action possible” -- including strikes, if needed -- to oppose the closing of the defined-benefit pension program, he added.

“This is people’s lives,” said Pullinger, whose union says it represents 134,000 postal workers at Royal Mail and other employers. “The effects of closing that scheme would be massive.”

The U.K.’s June 23 vote to leave the European Union and the Bank of England’s subsequent interest-rate cut have deepened a pension crisis at many companies by reducing investment income. Pension deficits increased by more than 40 percent over two months through the end of July, with liabilities reaching a record high of 856 billion pounds ($1.1 trillion), according to consulting firm Mercer.

Three years

The effect on pension plans may not be immediate because they conduct valuations over three-year periods to determine contributions. Royal Mail is in the middle of such a review, but declined to say when it was due to end.

Royal Mail said “early indications” show that its contributions to the plan would have to rise to more than 900 million pounds annually from around 400 million pounds.

“Such an increase in costs is not sustainable,” the company said in a statement.

Pullinger said it was “concerning” that the “mood music is that this is already decided. It’s not in keeping with the agreements we made when the company was privatized” in 2013. He said official consultations over the plan, which closed to new members in 2008, had not begun.

“Current financial market conditions suggest that keeping the plan open to accrual in its current form beyond 2018 will not be affordable," Royal Mail said in its annual report in June. Pullinger said the union wants to see that target date pushed back “on the basis that the economy will eventually recover.”

[Blackburn4511]

Per a financial 'analyst' i have spoken with:

From talking to C-Suite management RMG want to move all FTE to DC scheme, at a higher % of salary than current DC scheme.
Company will pressure union by arguing DC FTEs (~30%) are at a material disadvantage DB FTEs (~70%)
If successful total pension cost moves from c£400m p.a. £350m p.a. and company is free to continue paying dividend

What say you here? Rubbish? Politics? Reasonable?

[jetblack]

Per a financial 'analyst' i have spoken with:

From talking to C-Suite management RMG want to move all FTE to DC scheme, at a higher % of salary than current DC scheme.
Company will pressure union by arguing DC FTEs (~30%) are at a material disadvantage DB FTEs (~70%)
If successful total pension cost moves from c£400m p.a. £350m p.a. and company is free to continue paying dividend

What say you here? Rubbish? Politics? Reasonable?

I say that when I started 20 years back this job was a decent job - thanks, in part , to a decent pension scheme. I say that over the last 30 years in the UK we have seen a race to the bottom and this job, like just about every other, is no longer a decent job .

I say RM can afford to keep a decent pension scheme open for the people that produce the profits.

I say closing the DB scheme isn't a result of market conditions at all - its merely another means by which the top 10% widen the (ever increasing) gap between themselves and the rest of us.

What say you ?

[RobertT]

I would say realistic!

While I obviously don’t agree with the proposed change to a DC scheme, the idea that RM employees are immune to the reasons DB schemes have been closing down across the country for years, is ridiculous.

Although in practice with RM now being a plc, the powers that be have more to occupy their minds and the companys profits, than our pensions.

With knocking on for 30 years service, I too have seen the job go downhill in virtually every respect. But in my opinion we have to be realistic about the pension. You only have to look at your annual statement and do a little bit of maths with the contributions that both we and RM make, to know that based on average life expectancy, there’s not enough money going into the pot to sustain the current scheme considering the low returns on its investments.

I’m not saying we shouldn’t try to fight it but whether we like it or not, the RM is now being run to please the shareholders, not us.

[toomuchcoke]

From talking to C-Suite management RMG want to move all FTE to DC scheme, at a higher % of salary than current DC scheme.

That is the obvious "bribe" (if we may use such a word) to try and get the idea accepted ... They could also offer a pay rise. (I'll take both please!) They could also offer a lump-sum payment to staff affected by the closure of the DB scheme.

[Martin Walsh]

Now is not the time to blink or indicate a compromise on Pensions.

Let's be clear , Royal Mail have been leaking the potential closure of the Defined Benefit scheme post 2018 to see what reaction it receives. If we all suddenly put our hands up and say we understand that we have to be realistic about what Royal Mail can afford to pay post 2018 than we will simply get put into the DC scheme.

Let's be clear when Royal Mail closed the final salary scheme in 2008 they introduced an unagreed defined contribution scheme for new entrants which was vastly inferior scheme compared to the DB scheme. There were three tiers for employees contributions 3%,4,or 5% and the Royal Mail contributions were 5% , 6% and 7%. The CWU under the agenda for growth agreement amended the DC scheme and removed the 3% employee contribution rate as it would unlikely to give any individual a reasonable pension. The CWU also agreed to introduce a new tier where the employee can contribute 6% and Royal Mail 9% . However whereas under the DB scheme the risk is on Royal Mail under the DC scheme all the risk is on the employee. Remember the maximum Royal Mail pay under the DC scheme is 9% however of the 40 thousand members in the scheme on 3000 members have opted for this rate with the majority 19 000 opting for 4% with Royal Mail paying 7%.

Remember Royal Mail are currently paying 17.1% pension contributions under the current Defined Benefit scheme.

Under the planed closure of the POL pension scheme which is ongoing to be replaced with a similar DC scheme as Royal Mail POL management sent out the following information based on some individuals

For a 30 year old who joined in August 2006 their annual pension would drop by £9200 or 55%

For a 45 year old who joined in August 1996 their annual pension would drop by £7000 or 41%

For a 55 year old who joined in August 1986 their annual pension would drop by £3400 or 21% while their lump sum would fall by £15600 or 31%

This is why we have to challenge Royal Mail and fight for a just settlement on pensions and not accept the simply transfer to the DC scheme and we have to attempt to improve the current DC scheme for members !

This is going to be a huge battle ! But remember if we blink too soon we will all be losers !

[aiden01]

so what is cwu action plan then dingo and what are cwu proposing.

[jetblack]

Markets fluctuate - this much we know.

But what happened to the profits that Royal Mail made for the last 35 years ? What was the governments priorities, just like the shareholders PLC now ? To reinvest profits into the business ? To invest into the employees pension scheme so that in days like these when the bond rates are tumbling we'd still be alright ?

We can talk about market conditions all day long - but ultimately what matters is the priorities of those that are in the driving seats of this countries economic infrastructure. Who, ultimately, is going to pick up the tab ?

We, you and I, aren't a priority - when we should be. We should be the only priority.

[heapsy]

I supported and took part in industrial action last time but am not so sure about future involvement. Not so long ago I looked at the seniority list in our office. Of the 90 or so people on the list there was a staggering 22 people who were not employed when the last dispute took place. Add two or three more to that, as I don't know how up to date the list was, or if people have started since, and there is the problem. RM have divided and conquered the staff in the space of 8 years. Nobody is likely to join industrial action if the changes do not affect THEM. I think we have to accept the new pension arrangements and get the best we can. In that time we have to remember that pay has grown considerably, adding to the problem, as the actual money paid has increased in line with the pay.

[fishtank]

It amazes me that members will fight for a pay rise of a couple of percent but won't fight a pay cut of around 30%, that's what this is, the fact that it's a pension pay cut doesn't stop it being a pay cut, you could be trying to live off that pension longer than you've been working.

This isn't about the company being able to afford the pension, it's about the company increasing shareholder returns, the irony is a great deal of royal mail shares are held by pension funds so you could be sacrificing your own pension income to boost the pension income of someone already on a superior pension as well as lining the pockets of a pension fund manager.

[mark.cup]

Now is not the time to blink or indicate a compromise on Pensions.

Let's be clear , Royal Mail have been leaking the potential closure of the Defined Benefit scheme post 2018 to see what reaction it receives. If we all suddenly put our hands up and say we understand that we have to be realistic about what Royal Mail can afford to pay post 2018 than we will simply get put into the DC scheme.

Let's be clear when Royal Mail closed the final salary scheme in 2008 they introduced an unagreed defined contribution scheme for new entrants which was vastly inferior scheme compared to the DB scheme. There were three tiers for employees contributions 3%,4,or 5% and the Royal Mail contributions were 5% , 6% and 7%. The CWU under the agenda for growth agreement amended the DC scheme and removed the 3% employee contribution rate as it would unlikely to give any individual a reasonable pension. The CWU also agreed to introduce a new tier where the employee can contribute 6% and Royal Mail 9% . However whereas under the DB scheme the risk is on Royal Mail under the DC scheme all the risk is on the employee. Remember the maximum Royal Mail pay under the DC scheme is 9% however of the 40 thousand members in the scheme on 3000 members have opted for this rate with the majority 19 000 opting for 4% with Royal Mail paying 7%.

Remember Royal Mail are currently paying 17.1% pension contributions under the current Defined Benefit scheme.

Under the planed closure of the POL pension scheme which is ongoing to be replaced with a similar DC scheme as Royal Mail POL management sent out the following information based on some individuals

For a 30 year old who joined in August 2006 their annual pension would drop by £9200 or 55%

For a 45 year old who joined in August 1996 their annual pension would drop by £7000 or 41%

For a 55 year old who joined in August 1986 their annual pension would drop by £3400 or 21% while their lump sum would fall by £15600 or 31%

This is why we have to challenge Royal Mail and fight for a just settlement on pensions and not accept the simply transfer to the DC scheme and we have to attempt to improve the current DC scheme for members !

This is going to be a huge battle ! But remember if we blink too soon we will all be losers !

Those figures are shocking we have been stitched up once already with our pensions...

If this is really the way they are going defined contribution then we should be be given several options including us paying 10% and Royal Mail paying 17% for the ones serious about planning for retirement! As also shown most will take the cheapest option I just don't get how people take so little interest in retirement planning when most of us have been doing such a physical job for so long

[toomuchcoke]

But what happened to the profits that Royal Mail made for the last 35 years ? What was the governments priorities, just like the shareholders PLC now ? To reinvest profits into the business ? To invest into the employees pension scheme so that in days like these when the bond rates are tumbling we'd still be alright ?

Until comparatively recently if a defined benefit scheme was valued at having a surplus of greater than 3% (IIRC, might have been 5%?) then the HMRC would be asking questions of the company as to whether it was running a defined benefit pension scheme or a corporation tax evasion scheme ... If a scheme had an "excessive" surplus the solutions where to ether increase the benefits paid or reduce the amount paid in, and no prizes for guessing which option any rational employer would go for! It was thus basically impossible for a DB scheme to build up a large surplus when things where going well in order to cover the situation when things where not going well. To make matters even worse, schemes where only fully valued against their liabilities every 3 years, so if you where unlucky with the timing you could end up with the company reducing it's contributions and there then being a stock market fall meaning a small "excess" surplus became a large deficit in 3 years time ...

I supported and took part in industrial action last time but am not so sure about future involvement. Not so long ago I looked at the seniority list in our office. Of the 90 or so people on the list there was a staggering 22 people who were not employed when the last dispute took place.

Probably even worse than that where I work, I suspect only half of the staff (at best) have been around since before 2008.

[mark.cup]

I wonder if there could be the option of doubling our contributions to keep the scheme running I for one would be more than happy to sign up for something along those lines

I would then just reduce my AVC payments but someone with more knowledge and access to actual figures would probably say if that was even a possibility

[heapsy]

I wonder if there could be the option of doubling our contributions to keep the scheme running I for one would be more than happy to sign up for something along those lines

I would then just reduce my AVC payments but someone with more knowledge and access to actual figures would probably say if that was even a possibility

A good idea but I would like to point out two things. 1 We had the option to increase contributions to resolve the last dispute, it was rejected. Secondly, many members are middle aged, and therefore have significant amounts built up in the NRA60 pension. The AVCs can be taken at 60 if you elect to do so, and many would opt for that. If that was the case, there would be little appetite to increase contributions for something to be taken 5 years further on.

[RobertT]

I wonder if there could be the option of doubling our contributions to keep the scheme running I for one would be more than happy to sign up for something along those lines

I would then just reduce my AVC payments but someone with more knowledge and access to actual figures would probably say if that was even a possibility

I would also go for that, but RM are saying they need to increase their contributions from 17.1% to over 40% to keep the scheme open. Assuming those numbers are right, even a doubling of an employees contributions would also see RM’s rate having to increase significantly, which they seem determined not to do.

We knew back in 2013 when the last pension changes were announced that the funding for the RMPP was only there until 2018 and that wasn’t 100% guaranteed. So it’s nothing particularly new, we’ve known for 3 years! But the problems the CWU face in fighting this change are:

1. Roughly 30% of the workforce are already in the RMDCP, so don’t really care what happens to the RMPP.
2. A reducing union membership due to a perceived reduction in union support in major change in the business. Not necessarily true in my opinion.
3. A large proportion of the workforce who just aren’t interested in pensions or how they’re going to fund their retirement.
4. The CWU have far less clout than they used to have.

I’ve spoken to people around the same age as me and they just assume that retirement will just magically happen when they pay their mortgage off or reach a certain age, which they just seem to pluck out of thin air. Which is frightening considering how much time you can spend in retirement and the sort of money needed to fund it.

As someone who’s been interested in pensions for over 20 years I know the value of the RMPP and don’t want it to close anymore than anyone else does, and would be prepared to take industrial action to protect it, if I think it will. However I also know that RM can ultimately do more or less what they want with the pension scheme and whether we like it or not we are no longer a lumbering giant of a company, with a monopoly over the postal/parcel market. And gone are the days that we could go on strike for a couple of days and the company would just give in to our demands.

In reality the squeeze on the pension scheme is down to a number of factors, with the first 2 being the main ones:

1. Increased life expectancy
2. Lower than expected investment returns
3. The need for the business to modernise and compete with our rivals & the associated costs
4. To provide a healthy dividend for the shareholders

I appreciate the last point won’t sit too well with some, but that’s the reality of the Royal Mail today. Whether we like it or not, we are a plc, that’s what healthy plc’s do. Or would you prefer less profit and less money to invest in competing with our rivals and the slow loss of business that would result? That would put even more pressure on the pension scheme.

I’m not being defeatist but I think the RMPP will close in 2018 regardless of any action the union might take. Some might not agree with me, fair enough, but that’s my opinion all the same.

The main job of the CWU is to get the best deal possible going forward.