New United DB Scheme

[Martin Walsh]

I have detailed some of the union's proposed pension scheme for all DC and DB members. The union has looked at the performance over the last 21 years. In that 21 years since 1997 there have been 3 years where there was a dip in the equity market.

On the new scheme of an OPG who started on £9807 and their salary had increased to £21,440 at the state age of retirement this pension would have produced an estimated pension of £8573 per annum.

A final salary scheme over that same period would have produced £7504.

The current DB scheme would have produced £7099.

The proposed Royal Mail's proposed DC scheme would have produced £3500 per annum.

The lowest tier of the DC scheme would have paid £1700

Even if the new CWU proposed united scheme did not have any increase during that 21 years it would have paid £5554 significantly above the DC scheme return.

No one know what the market will return over the next few years but the union's proposal is worth fighting for and the name of the scheme will be called winners as all OPGs will be in this scheme.

[Glenno]

Went to a meeting recently and was very surprised at how well this new scheme has been put together, Terry and the team appear to have come up trumps with this, so much so that RM cannot find anything major that is wrong with it, I believe this will become a runner, win, win

[daveyeff]

aye, but as you said in your previous post dingo, their response to this new scheme proposal shows their utter contempt for the workforce. so, what was their response?...reading in between the lines it sounds like they have rejected it?...have they? and if so, why? what excuse could they possibly come up with if this new proposed scheme is as good as it sounds.

[clashcityrocker]

what excuse could they possibly come up with if this new proposed scheme is as good as it sounds.

The new scheme will cost them £100 million when they want to find savings of £70 million.

[daveyeff]

what excuse could they possibly come up with if this new proposed scheme is as good as it sounds.

The new scheme will cost them £100 million when they want to find savings of £70 million.

which is the equivalent of a 2.5% payrise which by the sound of it, the union is prepared to forgo. so it would cost them 100m anyway if we were to take that sort of rise. as for the 70m savings they now want to find, they weren't using that excuse when they sent out the communication to us all telling us of their intention to close the scheme. they claimed that they are closing it because it would cost them 1 billion to fund it. now it turns out, that was a heap of shite and their real reasons was....as you say clash..further savings. what a pack of scumbags.

[jetblack]

Is there anywhere that we can view this proposal (in detail) ? I have had absolutely zero communication on this (or on anything else come to that) from the union. The proposal is, after all, being put forward on the behalf of people like myself.

If it transpires that we are ballotted on industrial action it would be nice to be able to make informed arguments for the unions proposal. As it is I still have quite a few questions about the proposal. I want to be behind it - but it would be nice to know exactly what it is that I'm behind.

In particular I would like to know the proposed asset allocation going forward, about projected assets vs liabilities .

On a related topic, I seriously think it should be part of the CWU (as a part of a collective TUC and Labour Party effort) policy to be seriously lobbying Government on QE and interest rate policy. Otherwise we are pissing into the wind TBH, no matter the meat of the union proposal.

[fishtank]

How many millions did they piss up the wall with the complete failure that was World Class Mail?
How many of those "pillar leads" are still hiding throughout the business?
How many millions will One Plan cost before that inevitably goes the same way?
How much are they still paying the failed planners from the shambolic 2010 delivery revisions?
When it comes to savings what are royal mail's priorities?
The current staff or hiding past failures?

[yellowbelly]

aye, but as you said in your previous post dingo, their response to this new scheme proposal shows their utter contempt for the workforce. so, what was their response?...reading in between the lines it sounds like they have rejected it?...have they? and if so, why? what excuse could they possibly come up with if this new proposed scheme is as good as it sounds.

Can someone in the know confirm whether this United DB scheme been presented to RM and have they actually rejected it?
I've read through the various threads/posts but can't see anywhere that it states RM have actually rejected it.
Surely they would wait until the end of the consultation to categorically reject the proposal out of hand??? The recent pension bulletin just states:

'The United Scheme is affordable for Royal Mail. Their decision to either accept or reject the union’s proposal
will demonstrate if they really are concerned with safeguarding our pension or is this really just another cost
cutting exercise?

My layman's thoughts are that there's probably a bit of bargaining to be done/going on, RM gave DB members a nuclear option, CWU have presented a solution
for DB and DC members but if RM say 'yes' what will be the pound of flesh RM will want in return?

[jetblack]

I thought this made interesting reading.

Its an article about a recently published Government consultation paper on pensions.

"In a surprise rebuke to the pensions industry, [the paper] says Britain’s final salary schemes are more affordable than widely believed.

It notes that deficits in pension schemes have narrowed from a peak of £400bn to £196bn and “the evidence that DB schemes are unaffordable is far from being conclusive and should be considered with caution”.

Companies that complain they cannot afford their pension schemes seem to be able to pay out large dividends to shareholders, the paper notes. “In 2015, FTSE 100 companies paid about five times as much in dividends as they did in contributions to their DB pension schemes,” it says.

“The 56 FTSE 100 companies with a DB pension scheme deficit paid 25% more in dividends (£53bn) relative to their deficit (£42bn). Therefore, in theory, these companies have the ability to immediately repair their pension scheme deficits were they to feed their dividends into deficit repair contributions (DRCs).”

[heapsy]

I thought this made interesting reading.

Its an article about a recently published Government consultation paper on pensions.

"In a surprise rebuke to the pensions industry, [the paper] says Britain’s final salary schemes are more affordable than widely believed.

It notes that deficits in pension schemes have narrowed from a peak of £400bn to £196bn and “the evidence that DB schemes are unaffordable is far from being conclusive and should be considered with caution”.

Companies that complain they cannot afford their pension schemes seem to be able to pay out large dividends to shareholders, the paper notes. “In 2015, FTSE 100 companies paid about five times as much in dividends as they did in contributions to their DB pension schemes,” it says.

“The 56 FTSE 100 companies with a DB pension scheme deficit paid 25% more in dividends (£53bn) relative to their deficit (£42bn). Therefore, in theory, these companies have the ability to immediately repair their pension scheme deficits were they to feed their dividends into deficit repair contributions (DRCs).”

The whole thing about pension deficits is purely an illusion. It makes the assumption that everyone will claim their pension on the same day, therefore rendering the scheme bankrupt. It has never, nor would it ever happen. This is a blatant case of corporate fraud. Aided and abetted by the government, and before anybody goes on about the Tory scum crap, let us not forget Gordon Brown. Taxing the dividends of the shares held within pension schemes, has, in effect, killed every Final Salary pension in the country. The political elite in this country are one and the same, regardless of which party they claim to be from. If you look at their lack of action on the pension issue, housing, REAL (full time) job creation, it is only a dream. Whether you believe in them or not, the rise in UKIP and other parties has come about through inaction of the political elite. The British people are far too tolerant. It is too late now, we have reaped what we have sown.

[Martin Walsh]

Royal Mail have not rejected it. Talks are continuing .

[fishtank]

It would be very unusual for a business to reject a proposal while a consultation period was ongoing.
We are unlikely to receive an official response until after the process has concluded but personally I'm not holding out much hope, their position appears to be dogmatic.

[daveyeff]

They sent us all a letter claiming it was unaffordable because it was going to cost 1 billion. now it turns out they don't want to pay even the 400m they currently pay. and want this reduced by 70m. as you said dingo, this response shows their utter contempt for us. so it is a forgone conclusion imo anyway that the talks will fail and we'll be out.(if we get a yes vote)

[heapsy]

They sent us all a letter claiming it was unaffordable because it was going to cost 1 billion. now it turns out they don't want to pay even the 400m they currently pay. and want this reduced by 70m. as you said dingo, this response shows their utter contempt for us. so it is a forgone conclusion imo anyway that the talks will fail and we'll be out.(if we get a yes vote)

Tbh I don't think we will.

[RobertT]

This proposal is very interesting but based on Dingo’s limited information, it’s difficult to ascertain whether it’s a viable option or not. However there are two main problems with DB pension schemes which will never go away:

a. They rely on investment returns to make them affordable for the company. RM have already had their fingers burnt on that front and may be unwilling to go a similar route again. No investment is fool proof and nobody invests with the intention of losing money, but sometimes that does happen. To make up for any bad years, the investments would have to be that much better than average during the good years, which in turn means investing in more volatile equities and more unknown factors.

b. Life expectancy is a major consideration in the affordability of any DB scheme and puts more pressure on the investments performing to the required level. Everyone living for just an extra 12 months more than expected can add hundreds of £Millions onto a schemes’ liabilities. That money would have to come from somewhere!


A DB pension is always preferable for the worker because it offers guarantees of future pension accrual and provides a guaranteed income in retirement. A DC scheme does neither!
But personally I can’t see much further than the proposed DC scheme being introduced, with perhaps a few tweeks, whether we strike or not.