Royal Mail Union Threatens Strike to Protect Pension Plan

[nataddick]

As far as I know, RM have not yet said that they cannot afford to continue to pay the 17.1% of pensionable pay that they do now. What they are saying is that the anticipated cost of funding future accrual on the existing basis, without using the surplus,is in the region of 40% of pensionable pay which they argue is unaffordable. RM's view would no doubt be that funding at 40% would in effect give us a deferred pay rise of roughly 23% !

As you say toomuch, if the CWU successfully argue to retain regular funding at a least 17.1% of pensionable pay then it raises the issue of how this is equitably distributed to all new and existing RMDCP pension scheme members. It could be argued that all current RMPP members who pay 6% should get an employers contribution of 17.1%. As Dingo says, RM will probably look to offer a maximum employers contribution of 9% to transferring members and pocket the difference. Given any form of option, I suspect many members will look to pay less that 6% which RM will love as this will lower their overall contribution from the maximum.

For anyone interested in reading the RMPP's 2015/6 Report & Financial Statements which have just been made available they can be found here.

http://www.royalmailpensionplan.co.uk/s ... 2016_0.pdf" onclick="window.open(this.href);return false;

This document is well worth a read but is missing vital information on the scheme's current liabilities stating :-

'An actuarial valuation as at 31 March 2015 is underway, but has not yet been completed as RMG and POL are discussing the long-term sustainability of the Plan with their respective trade unions. Once these discussions have concluded, the actuarial report for the year ended 31 March 2016 will also be carried out. We will provide an update on both the 2015 valuation and the 2016 annual funding update in our newsletter, Pensions News, which we expect to send to Plan members in Spring 2017.'

[jetblack]

What they are saying is that the anticipated cost of funding future accrual on the existing basis, without using the surplus,is in the region of 40% of pensionable pay which they argue is unaffordable. RM's view would no doubt be that funding at 40% would in effect give us a deferred pay rise of roughly 23% !

They are currently paying roughly (for the ease of calculations sake) a 3:1 ratio of contributions.
They say an extra 23% of pensionable pay is required. Split between us and RM along current lines that would be an extra (roughly) 6% from us and 18% from RM.
My extra 6% would come out of gross pay, so after tax I'd be down what, 4.8%. Likewise the extra 18% from RM would be out of gross profits - and corporation tax is 20% - so they'd be contributing 15% in real terms.

In other words, the £500m shortfall is split 3:1, RM to members contributions. RM pays £375m extra, we pay £125m. After tax RM pay £375m less 20% = £300m.
I'm paying an extra 4.8% net, but given that I and a lot of my colleagues are in receipt of WTC, and for WTC purposes pension contributions are deductible from gross salary anyhow, I (we) would really be down a negligible amount.

RMDCP members would not be affected and would likely not be too keen on extra contributions anyhow.

Would the DB scheme members be keen on it ?

It should be said also that the £500m quoted by RM should be taken with a pinch of salt in my view - they have, after all, a vested interest in making appear that the scheme is wholly not viable.

[nataddick]

jetback, I agree with your thinking.

Of course, no one really wants to pay any more if they can avoid it but allowing members to pay an increased contribution to preserve some form of DB accrual in return for at least a matched contribution is an option that I hope the CWU negotiators are considering.

There is an argument that the existing RMDCP members are largely unaffected by the proposed changes to the RMPP. However, Recommendation 7 from the Postal Policy Forum on The Future of Royal Mail, Pay and Pensions in March 2016 was :-

'In respect of pensions we will protect the Defined Benefit Scheme and seek to extend the current guarantees beyond 2018 and seek further improvements to the design of the Defined Contribution Scheme to make it more collective and give members greater confidence about pension outcome'

So, this would suggest that the CWU negotiating team will have to balance the needs of all pension scheme members when they agree the funding arrangements post March 2018 with RM. Not an easy one !

[toomuchcoke]

As you say toomuch, if the CWU successfully argue to retain regular funding at a least 17.1% of pensionable pay then it raises the issue of how this is equitably distributed to all new and existing RMDCP pension scheme members. It could be argued that all current RMPP members who pay 6% should get an employers contribution of 17.1%. As Dingo says, RM will probably look to offer a maximum employers contribution of 9% to transferring members and pocket the difference.

It can be argued either way IMHO and neither way is necessarily "fair"! You either end up with some on 6+17.1% and some on 6+9% (and some on less of course), or everyone on 6+14(ish)% (and again some on less). I suspect which is regarded as better may depend upon which pension scheme one is currently a member of!

(I guesstimated at 6+14(ish)% based on my recollection (hopefully correct) of something RobertT(?) posted a while back which had the rough split of members between the defined benefit and defined contribution schemes at 2:1. So assuming everyone in the DB scheme got transferred over at 6+9% that would leave ~8% to be spread over a larger pool of members, and I reckon it comes out at about 5% if you do that.)

Given any form of option, I suspect many members will look to pay less that 6% which RM will love as this will lower their overall contribution from the maximum.

You raise a good point there. Obviously the CWU's "Plan A" is to protect the existing pension, however if they're on the ball then they should considering a "Plan B" (and if necessary, C, D & E!) for if it's not achievable. (Nb: I'm not commenting either way on whether it is or isn't, merely that they should also have a plan for getting the best possible deal if it isn't!) The default level of contribution in the defined contribution scheme is 5%, with the option to choose 4% or 6%. If it comes about that you all end up making your future contributions to the DC scheme then the CWU should argue that you should all be defaulted in at 6% - people won't notice any major changes in their payslips, but the resulting impact on their eventual retirement will be less than if they default in at 5% and make no effort to change.