CWU Proposal

[Hawkey99]

I believe they have put a proposal to RM.

Does anybody know the details yet ??

Thanks

[Martin Walsh]

The CWU proposal is for a united DB scheme which would mean the closure of the current DC scheme and DB scheme.

The new DB scheme would require Royal Mail to pay 17.1% contributions. This should not be that much a problem as in Royal Mail's communications they claim that from April 2018 under the new DC scheme they would still be paying 17% , 10% pension contributions and the remaining cost is the death benefit and windowers cost.

The proposal the union have put would have safeguards for Royal Mail so the cost would not increase above 17.1%.

The unions proposal would be a pension scheme which would be invested in grow and not be cautious in investing in guilds or bonds.

Each year the pension will be valued against RPI and will when the pension exceeds RPI will be increased and where it does not it will not automatically increased.

The CWU proposal has been reviewed and tracked over the last 21 years from 1997 until 2016. In 3 of those years there would have been increased , however over the 21 years it would have paid an average of 3.4%.

In those 21 years it would have exceeded a final salary scheme , the current DB scheme and would have paid significantly higher than any DC scheme.

The union has even looked at if over those 21 years it did produce any increase it would have still beaten by some distance Royal Mail"s proposed DC scheme.

The other difference is you take this pension at the state age of retirement which will be different depending on your birth date. You can still take this pension early from 55 with the normal 5% reduction per year.

Your other two pensions i.e. The service up to 2008 can still be taken in full from 60 and the current DB from 65. The new proposal will just be a third pension pot for service from April 2018.

For those who are in the current DC scheme and will not have a good pension this is a massive improvement as they will be in a united scheme which will deliver a reasonable pension in retirement. For those in the Current DB scheme this is good replacement and over the last 21 years it would have produced a better return than a final salary or the Current DB scheme and would have dwarfed a DC scheme.

Royal Mail currently pay 400 million per year into pensions including the cost of the DB and DC scheme. The unions proposal for a united scheme is 500 million which is the equivalent of 2.5% pay rise.

The united scheme is the right thing for all members and is worth fighting for.

Royal Mail's response shows the contempt they have for us. They say that their current pensions costs are 400 million and they want to reduce this by 70 million and this would be the national insurance costs.

If Royal Mail continue this position that the union will ballot. We all deserve a decent affordable pension. The union's proposal delivers this. SUpport the CWU.

[jetblack]

Bit confused. Could you clarify ?

Is the link to final salary maintained or not ?

[Martin Walsh]

I did not say it is the final salary. Infact I said over the period of 1997 and 2016 it out performed a final salary scheme.

Royal Mail do not want to close the scheme based on paying 17% but because stocks and returns have not produced enough and instead of paying 400 million they believe it will rise to 1 billion per year.

The unions proposal is aimed at capping Royal Mail pension contributions so they do not go up past 17.%.

The union has some of the leading pension experts in the U.K as advisors.

There will be a year evaluation and depending if the pension has out performed RPI there will either be a pension increase or not. The pension will produce a guaranteed sum.

The scheme will still be called. Wage in retirement scheme


Members contributions 6%
Employer contributions. 17.1% ( to be kept broadly fixed )
Pension accrual rate 1/60
Partner pension. 50% of members pension
Normal Retirement Age. State pension age ( and moving with SPA )
Cash. BY commutation
Lump sum on death in service. 4 x salary
Target revaluation before retirement. RPI
Guaranteed revaluation before retirement Nil
Target increases in retirement RPI
Guaranteed increases in retirement. Statutory minimum

[Spedley]

Awesome, it looks like the union have finally hired an accountant with my subs and not spent it on beer and biscuits.

I hope they don't compromise this but force RM to take it as is. I said before I didn't want to strike for no reason but this reasonable solution is worth striking for.

[jetblack]

OK - thanks for reply. Still trying to get my head round it.
So its still career average - so still defined benefit. Any increase in the pension fund, that is now free to invest more extensively in the stock market, over and above inflation gets ploughed back into the fund - and going on historical precedence this will help bring about the growth in the fund required to meet its obligations, in addition to contributions.

Definitely along the right lines in bringing current DC members into a unified DB scheme.

Still a bit unsure as to what would occur should the stock market underperform inflation.

But on the whole this proposal sounds reasonable to me. What do others think ?

[oypostie]

I agree this sounds like a reasonable compromise and affordable for Royal Mail if they give a monkeys about their workforce

[mark.cup]

Sounds good to me

[fishtank]

The unions proposal would be a pension scheme which would be invested in grow and not be cautious in investing in guilds or bonds.

That's the real elephant in the room though dingo, how much risk is too much and how much does the viability of the proposal rely on good/lucky investment?

I do agree that the current pension scheme is ridiculously risk averse and one of the reasons royal mai is claiming that it has to increase its contribution rate is that it is based on a fund plan that earns next to nothing itself but.....The more risk you put into your proposal/model the weaker the proposal becomes because you are starting to rely on best case projected earnings. So without going into the technical stuff how much risk are we talking about.

Industry average or above?

[Judgee]

So the DC pension would be improved is that right?

This would be good as there is a hell of a difference in the final payout between the two right now.

[jetblack]

Average annual growth in the FTSE 100 over the last 20 years is around 5.4% p.a. - RPI over the same period is around 2.7% pa.

Of course, past performance is no guide to future returns, as they say.

Who picks up the tab if the stock market (some would say currently overvalued) tanks ?

I suppose though that where the risk is spread over time the hit is diminished. And I'm assuming that there would be some kind of active management and hedging going on, as opposed to sticking the whole fund in a FTSE tracker.
Bonds and gilts, with their (albeit currently paltry) surety of return would still be playing a part presumably also.

No, if the clever people have done the sums - and it all adds up - and the proposed scheme is indeed a defined benefit scheme where, ultimately, the risk is on the employer - then this proposal is looking pretty good to me.

Probably not looking so good for TPTB at Royal Mail, wether it all adds up or not - they've got their hearts set on big cuts > up dividends and share price.

[jetblack]

So the DC pension would be improved is that right?

No - under the proposal it would be scrapped apparently and everyone would be put into a new Defined Benefit scheme

And this new scheme would be way better for those currently in the DC scheme - they would be the true winners out of this proposal. And rightfully so IMO

[Judgee]

So the DC pension would be improved is that right?

No - under the proposal it would be scrapped apparently and everyone would be put into a new Defined Benefit scheme

And this new scheme would be way better for those currently in the DC scheme - they would be the true winners out of this proposal. And rightfully so IMO

Well that's good. I put off joining the pension scheme for many years and missed the older better one by three months not realising just how bad the new one would be in comparison. Perhaps I'll end up with more than the currently estimated £60 a week for my eventual 30+ years contributions!

[fishtank]

People are not on the whole obsessed by money, to most it's just a means to an end in order to pay the bills and put food on the table. For some people money equals power and power is the real obsession not the money itself.

[BeamishStout]

The CWU proposal has been reviewed and tracked over the last 21 years from 1997 until 2016. In 3 of those years there would have been increased , however over the 21 years it would have paid an average of 3.4%

Am I right to assume that you really mean In 3 of those years there would have been no increase?

I like the sound of the CWU proposals but also wonder why RM would ever agree to an annual £100m increase into the pension funding rather than sticking at £400m (+inflation). From the sounds of it Dingo we will be hard pressed to get them to commit to maintaining current levels of company pension payments however it is laid out on the negotiating table.

Your point re how our funds have been (and will continue to be) invested is a very salient point. Of the RM pension funds only 34.4% ( from Trustees report 2016) are currently invested in 'return-seeking assets' (equities and company bonds) and 65.6% in 'matching assets' (government bonds and cash). And interestingly as well these 'matching assets' went up by 10.6% and 'matching by only 3.7%! But this was for 2016 - you would expect the figure for 2017 (when it is finalised) is way more in favour of 'return-seeking assets' after the recent market surge.