Royal Mail Union Threatens Strike to Protect Pension Plan

[jetblack]

Stocks are seen as high risk - not what you want to be (overly) invested in when you have to provide pensions. However, I would say that, personally (and I am no expert), the allocation of the pension fund could do with looking at. Does it invest in , for eg. Gold ?

Putting aside increased life expectancy, the problems really began in 2008, with the credit crunch. In 2007 interest rates were around 5.5% - 18 months later they were down at around 1%. Now the base rate is 0.25%.
The reduction of the base rate by the central bank (and the QE) are, IMO, political decisions. That is, the credit crunch needn't have been handled that way by the central bank(s).
It must have been known at the time that it was decided to use interest rates that there would be the ensuing crisis in pension funds - but it was never mentioned. Indeed, it seems to have been a price worth paying (and continues to be so).
Of course, all this mostly applies to DB schemes such as ours, where the liability/risk is on the employer.

I'm not knowledgable enough to know the ins and outs of why the central bank interest rate policy was beneficial to the commercial banks that the Govt. was trying to keep afloat at the time - but I'd put money on saying that it was beneficial to them.

Anyhow, things go up, things go down.

I'll make a prediction here now of what might well be the medium to long term outcome of the DB pension situation. The RM DB scheme is axed with the legitimation that life expectancy is increasing and gilt returns are flat. Everyone agrees there is no other way.
RM continues with its modernisation program (thus reducing labour costs on top of pension costs). 5 or 6 years down the line interest rates are back at the long term average of around 5%. But there is no talk of reintroducing a defined benefit scheme now that gilt returns have recovered and the whole thing becomes affordable again.
The shareholders (none of whom are posties anymore - they've all been forced, through economic necessity to part with their miserly allocation) are laughing all the way to the bank.

And the likes of you and me, fellow postmen and women, have, yet again, been clearly had.

Sorry if this is platitudinous.

Could some of you clever people start coming up with a way out of this mess please ? On top of the suggestions I made above, which were summarily trashed, how about lobbying the union to lobby the Govt. for a bail out the same way it has and does for the banks ? How about the union lobby for a review of interest rate policy, seeing as it is the low rates that are absolutely central to all this ?

[milly]

There isn't really a way out of this dire situation,if interest rates rise it would no doubt crash the economy as business's and the public are addicted to cheap debt.
In 2008 the banks should have been allowed to go bust and this would have purged the system.
Central Banks will continue to print money until they lose control.

[jetblack]

The banks have been bailed out (to date) to the tune of £850 billion.

The RM scheme needs an extra £0.5 billion a year until UK economic growth is deemed to be at a level that the Govt./B of E deem it's fitting to raise interest rates again - and the pension scheme will thus slowly but surely begin to erode its own deficit and start standing on its own 2 feet again.

The Fed in the US are already raising interest rates with more forecast to be on the cards.

If you were being cynical you might say that we, you and I, are effectively bailing out the bankers by the price we are having to pay in regards our pension scheme.

None of this is inevitable.

There is always a choice.

[RobertT]

Interest rates are decided by the Bank of England who are independent of the government. Infact there’s an article on their website that describes monetary policy quite well: http://www.bankofengland.co.uk/monetary ... s/how.aspx" onclick="window.open(this.href);return false;

Unfortunately for every winner there’s always a loser and in the case of low interest rates, DB pensions come out badly. I agree with Jetblack that there should be more diversification with the assets held by the pension scheme. Back before the credit crunch, the RMPP had about 80% of its assets in equities which took a dive when the markets crashed and then they went heavily into gilts and bonds, as did many other pension schemes and the same has basically happened again.
Had they weathered the storm and kept our money where it was, both the deficit the government took over and the current situation wouldn’t have been so bad, in my opinion.

Personally my stock investments suffered at the time but I held my nerve and not only kept my money invested but put in more money while prices were low, which is what ‘the experts’ always tell you to do and I reaped the rewards as the markets rose again.
So I would say that the pension trustees and the actuaries that advise them have a lot to answer for.

But you are suggesting that the government bail out the RMPP again? They’ve already taken on our £10+ Billion deficit! And what about the other pension schemes that are in a much worse position than ours? BT’s for example. Are they all to be bailed out by the taxpayer aswell? Resulting in more government debt and more austerity.

I agree with Milly, there isn’t really an easy way out.

[GRS]

Reading this and other threads covering the pension it looks to me that the majority have already thrown the towel in and accepted the change.

More people taking Pensions in the future and fewer people contributing to the pension pot as the workforce decreases over the next few years.
It really isn't difficult to understand that the pension in its present form cannot continue.
Does it seem fair? NO,But life isn't fair,so I would suggest that Royal Mail workers should look at investing in AVC's or a personal pension to mitigate the effects of the changes to our pension.

I do AVC and yet it seems that these are going to be stopped by RM as well even though it is paid into Zurich.

[milly]

Reading this and other threads covering the pension it looks to me that the majority have already thrown the towel in and accepted the change.

More people taking Pensions in the future and fewer people contributing to the pension pot as the workforce decreases over the next few years.
It really isn't difficult to understand that the pension in its present form cannot continue.
Does it seem fair? NO,But life isn't fair,so I would suggest that Royal Mail workers should look at investing in AVC's or a personal pension to mitigate the effects of the changes to our pension.

I do AVC and yet it seems that these are going to be stopped by RM as well even though it is paid into Zurich.

I have never heard that AVC's are going to be stopped.

[RobertT]

We don’t know if they’re going to be stopped or not yet, but as they are linked to the RMPP and that is expected to close, then there’s a good chance that AVC’s will stop as well. There’s a few threads on here where that’s already been discussed.

If they do stop there is nothing stopping you from putting more into the RMDCP instead.

[jetblack]

Interest rates are decided by the Bank of England who are independent of the government.

Well, yes, but they aren't really independent are they ?

Unfortunately for every winner there’s always a loser

Yes - but have you noticed how the loser always seem to be those at the bottom of the food chain ?

But you are suggesting that the government bail out the RMPP again? .

I'm suggesting a multi faceted approach.

Hey, this isn't my day job. I actually spend my working life delivering and collecting mail. I don't claim to have all the answers.
But I am making the effort to put forward a few. Because to me, as I know that you know Robert (being invested in it the same as I am), the death of the defined benefit pension scheme is a very big deal indeed.
It shouldn't be met with apathy and fatalistic resignation (sorry for the platitudes )

What RM is proposing is not the inevitable outcome of market conditions - rather, it is throwing the baby out with the bath water. They have no will to keep the scheme open. Which I can understand in purely maximising profits terms, from their point of view.
What I'm struggling with is the very same rationale from the members of the scheme who are set to lose out most under the proposals.

I'll let you all into a little secret. The interests of the Tory Government (the BofE)/the 1% who own this world DO NOT correspond with our interests, the working class.

Start from that foundation stone and work upwards. Otherwise they'll tie you in knots. Because they'll have you playing a game of their choice, with rules drawn up by themselves, and played on their home ground. And they'll have you believe that it's your own fault when you lose 10-0.

[Tman]

"The working class".
Same old bottom line from same old Jet. Class warfare at every turn.
Hey Jet, why not just post the link to "Socialist Worker" and save all the unnecessary wear on your keyboard?

[milly]

Interest rates are decided by the Bank of England who are independent of the government.

Well, yes, but they aren't really independent are they ?

Unfortunately for every winner there’s always a loser

Yes - but have you noticed how the loser always seem to be those at the bottom of the food chain ?

But you are suggesting that the government bail out the RMPP again? .

I'm suggesting a multi faceted approach.

Hey, this isn't my day job. I actually spend my working life delivering and collecting mail. I don't claim to have all the answers.
But I am making the effort to put forward a few. Because to me, as I know that you know Robert (being invested in it the same as I am), the death of the defined benefit pension scheme is a very big deal indeed.
It shouldn't be met with apathy and fatalistic resignation (sorry for the platitudes )

What RM is proposing is not the inevitable outcome of market conditions - rather, it is throwing the baby out with the bath water. They have no will to keep the scheme open. Which I can understand in purely maximising profits terms, from their point of view.
What I'm struggling with is the very same rationale from the members of the scheme who are set to lose out most under the proposals.

I'll let you all into a little secret. The interests of the Tory Government (the BofE)/the 1% who own this world DO NOT correspond with our interests, the working class.

Start from that foundation stone and work upwards. Otherwise they'll tie you in knots. Because they'll have you playing a game of their choice, with rules drawn up by themselves, and played on their home ground. And they'll have you believe that it's your own fault when you lose 10-0.

You seem to be going through the first 4 stages of grief with the changes to the Pension (Denial,Anger,Bargaining and Depression) hopefully you will get to the fifth and final stage of Acceptance soon.

[jetblack]

Hey, I'm doing alright my friend. I have varied investments outside RM that are doing quite alright. I aim to be out soon(ish)- and am currently working hard to that end. Don't worry about me.
But you are right to some extent, the pensions issue does make me angry. It makes me angry to see the glib resignation from people like yourself that the proposals seem to be met with.
No fight in you at all - yet you seem to have deluded yourself that you are insightful because you are able to get your head around the rationale put forward for the DB scheme closure. As if this is some sort of an intellectual achievement on your part

Poor show Milly, poor show.

[RobertT]

I think the membership of the pension scheme can be separated into 3 categories:

1. Those who understand what’s going on and having looked at the facts think the scheme will unfortunately close.
2. Those who understand but blame the fact RM is privatised, the government, the class system, etc, etc.
3. And those who just don’t seem to give a damn either way, but will probably moan when they get a bit older and finally realise they won’t be able to retire when they thought they could.

Those who fit into categories 1&2 can argue until they’re blue in the face, as we have been doing on this thread. But unfortunately number 3 relates to the majority of the membership and it’s those people who need to be made to understand the importance of the proposed closure of the RMPP. The trouble is they probably didn’t give two hoots when the final salary scheme closed in 2008 or when the 2014 changes were bought in either. So they will just carry on thinking ‘pensions are for old people’ or ‘I’ll think about my pension when the time comes’ and just continue with their apathy and in the process, force themselves to work longer.

You only have to look at the recent industrial action vote our friends at the Post Office had regarding the closure of their pension scheme to know how apathetic people are. Only 50% actually bothered to vote!

These people need to be educated and fast! Not only to drum up support for any possible industrial action votes, but to encourage them to take more interest in their own lives.

[milly]

Hey, I'm doing alright my friend. I have varied investments outside RM that are doing quite alright. I aim to be out soon(ish)- and am currently working hard to that end. Don't worry about me.
But you are right to some extent, the pensions issue does make me angry. It makes me angry to see the glib resignation from people like yourself that the proposals seem to be met with.
No fight in you at all - yet you seem to have deluded yourself that you are insightful because you are able to get your head around the rationale put forward for the DB scheme closure. As if this is some sort of an intellectual achievement on your part

Poor show Milly, poor show.

I have used facts,reason and logic to come to my conclusions rather than emotions.

[jetblack]

Hey, I'm doing alright my friend. I have varied investments outside RM that are doing quite alright. I aim to be out soon(ish)- and am currently working hard to that end. Don't worry about me.
But you are right to some extent, the pensions issue does make me angry. It makes me angry to see the glib resignation from people like yourself that the proposals seem to be met with.
No fight in you at all - yet you seem to have deluded yourself that you are insightful because you are able to get your head around the rationale put forward for the DB scheme closure. As if this is some sort of an intellectual achievement on your part

Poor show Milly, poor show.

I have used facts,reason and logic to come to my conclusions rather than emotions.

I have used facts, reason, logic and emotion.
Don't knock emotion Milly - it's the only thing that separates us from robots. You're gonna end up sounding like Hal, from 2001 A Space Odyssey, if you aren't careful

I agree with Roberts points above.

To get back to this interest rate business - what's actually happening when the BofE reduces the base rate is that it means that it's cheaper for the government to borrow money from our pension fund, in the form of low yielding Govt. bonds/gilts. I expect the pension scheme owns corporate bonds as well, much to the same effect.
Win win for the Govt. - but my question is this. If any of you have savings and or investment portfolios how much (as a proportion of your overall portfolio), given the interest rate, are you holding in plain old savings accounts ? That is, how much are you willing to lend to the bank at 1.0% ?
Haven't you, as investors, diversified a little to meet market conditions - wether that be in equities, property, PM's ?

Why hasn't the pension scheme done the same ? This is our money they are handling here - and they don't really seem to be giving us a great "bang for the buck".

[GRS]

Milly - you're not Canadian by any chance are you?