The Pension Solution.

[fishtank]

It would seem that the bottom line is the CWU and Royal Mail want some breathing space to come up with a pension for all DC scheme ( with a DB element? ) and lobby for changes in legislation to allow this to happen.

In the meantime the business seems to want to put us into the rejected Cash Balance scheme.
I'm struggling to make sense of that move.

Would the savings from having us temporarily enrolled in a CB scheme really outweigh the financial and administrative costs of setting up a temporary cash balance scheme if it was only for say...a year?

Which begs the question...How long do they envisage us being in this transitional scheme?

Which begs the question.....If the union and RM can't agree on a new scheme are we stuck in this CB scheme?

Which begs the question....What guarantees do we have that legislation would be changed, it's a Tory government and they're a bit busy at the moment.

Which begs the question....If we get some kind of legal guarantee that this is only a temporary move can we not have the same lawyer that missed the words "mediation process" on the last legal agreement?

My wife has a few pension schemes because she changes her employer relatively regularly, I've stuck with this firm for nearly 30 years, why do I have so many?

[Lincox]

Yes this seems a very odd idea. Generally a DC Scheme has individual contracts for each member, whereas this new scheme seems to infer that there will be one general pot of money from which some form of minimum pension in retirement linked to career average earnings will be paid with the hope that there will be sufficient growth within the general fund to enhance the minimum pension guarantee. Sounds like the old with profit pension annuities that you could buy.
Fish I would imagine that Royal Mail have already put into action the winding up of the existing scheme so it may not be practical to turn the clock back and let this carry on until legislation has been passed for the new scheme, assuming it does eventually get passed. Question to be asked is if the existing scheme is in surplus, what happens to that money, bearing in mind this is not Royal Mails money, it is in the pension trust funds.

[clashcityrocker]

I think the pension solution is somehow linked to the Irish border solution.
They both appear clear as mud.

[FAB]

What's the betting once we are temporarily enrolled in a CB scheme it will become permanent!

[k979aaa]

What's the betting once we are temporarily enrolled in a CB scheme it will become permanent!

It will but we can stop that happening and we must.

[LouBarlow]

Despite all their bluster, union leaders have failed us in regard pensions. The situation is still in limbo, yet they seem entirely happy with that, and are hoping a non-inflation beating pay-rise will paper over the cracks of their inept negotiations.

[nataddick]

Fish - I agree with you. The only ‘acceptable’ transitional Pension solution from the RMPP’s members point of view, is to keep the existing scheme open until the outcome of the proposed ‘revised’ WINR’s scheme is actually known. The latest declared surplus allows for this. My reading of the Mediator’s report on the Pensions Issue, is that we are being shafted by RM big time.

So, RM get to implement their latest Pensions proposal, leaving the longer term solution ‘up in the air’ with absolutely no guarantee that the necessary skeleton regulations under the Pension Act 2015 will ever be passed.The current RM proposal based on their ‘revised’ version of the original CWU WINR’s proposal moves from a DB scheme to a DC scheme and drops the target accrual rate from 1/60th to 1/80th, and a reduction in the employer’s contributions rate. For FFS when are the CWU going to get a grasp of the Pensions Issue.

[spen]

I thought royal mail had already received a tax rebate(or similar)regarding the closure of the existing pension scheme, which means come the end of the financial year it's gone anyway regardless of what's in place.

[cloherty1976]

My wife has a few pension schemes because she changes her employer relatively regularly, I've stuck with this firm for nearly 30 years, why do I have so many?

It's due to a changing world and finances and living standards are so different to back in the 70's and 80's.
Spoke to a postie who has just got his section B pension after 40 years at 60 and its know where as good as mine.
Always remember if you want more you can always pay in more too..avc's
Fire brigade springs to mind

[SW17]

Fish - I agree with you. The only ‘acceptable’ transitional Pension solution from the RMPP’s members point of view, is to keep the existing scheme open until the outcome of the proposed ‘revised’ WINR’s scheme is actually known. The latest declared surplus allows for this. My reading of the Mediator’s report on the Pensions Issue, is that we are being shafted by RM big time.

So, RM get to implement their latest Pensions proposal, leaving the longer term solution ‘up in the air’ with absolutely no guarantee that the necessary skeleton regulations under the Pension Act 2015 will ever be passed.The current RM proposal based on their ‘revised’ version of the original CWU WINR’s proposal moves from a DB scheme to a DC scheme and drops the target accrual rate from 1/60th to 1/80th, and a reduction in the employer’s contributions rate. For FFS when are the CWU going to get a grasp of the Pensions Issue.

As I've said in another post I would at the very least expect to remain in my current pension scheme until I knew what we were expected to accept as an alternative, otherwise I shall not accept this pie in the sky crap.

[Martin Walsh]

Until the full information comes out on the Pension discussions than I accept people will fear the worse.

However there has been real progress on some principles on pensions. There is a lot more discussion to be had. However these are what I understand to be what has been agreed and what both sides are discussing going forward.

Under the Pensions Legislation act in 2015 it passed for pension such as defined ambition pension schemes to be agreed. Despite the act it still requires regulation legislation to be agreed. The select committee on work place pensions has opened an inquiry where submissions are required by the 8th January on Defined Ambition Pension Schemes. Defined ambitions schemes in Holland and a few other European countries.

Royal Mail and the CWU have in principle agreed to one pension scheme for all based on a defined ambition scheme. This will be collective scheme. Royal Mail and the CWU along with other interested parties will lobby to get this through Government. Royal Mail have offered to fund the writing of the require regulation legislation if this assisted the progress.

Royal Mail have agreed that all basic pay and pensionable allowances would count under the new scheme towards pensionable pay. Remember anyone who joined after 1st April 1987 does not have their first £4000 count towards their pension. ( It is called a Lower Earnings Deduction )They make up 88 thousand members of the 93 thousand members in the current DB scheme. Additionally anyone in the current DC scheme and are receiving shift payment , TPM etc do not have these count toward basic pay and they will under one scheme.

The new scheme will give a wage in retirement. Additionally it will have an element of risk.

The Governance of the scheme is being discussed along with contributions. Royal Mail are willing to spend the 400 million which they currently spend on Pensions. The issue of National Insurance contributions is being discussed.

Considering Royal Mail and John Milledge personally had previously stated that Royal Mail would agree to one pension scheme for all over his dead body. No one can doubt there has been progress on the future of pensions.

However this government is a busted flush and is not making progress on anything so there is no certainty of the regulations being legally introduced. However lots of businesses and unions are lobbying on such a move as DB schemes come under attack.

Therefore Royal Mail and the CWU are discussing transitional arrangements until the scheme can be introduced. Part of this includes what happens if the DB scheme stays open and we draw down the surplus ? Two what if we use the surplus to assist an introduction of a temporary scheme. Additionally Royal Mail have put a proposal based on the transfer of current DB members into the Defined Benefits cash Balance Scheme and also anyone who is in the DC scheme who has over 5 years would be transferred into the Defined Benefit cash balance scheme. All other DC scheme members who have done more than 12 months would be transferred onto the highest tier of the DC scheme which only 3000 thousand out of the 45 thousand members of the DC shame are on.

None of the transitional arrangements have been agreed as yet. There are pros and cons on each. If we keep the DB scheme open than we do not get any of the DC scheme members any improvements and we draw down on the surplus which could be used to top individual pensions up in the way of an AVC. There are other options which are being discussed.

People who say the union has let down individuals on pensions , clearly do not understand what is happening in the world of pensions and what the union campaign on the principle of one pension scheme for all and a guaranteed wage in retirement.

There has been progress and the union is still discussing issues including the transitional arrangements so I am sure when everyone receives the full details you can make a full opinion of the pensions agreement.

[fishtank]

A bit more detail here...

PENSIONS. There have been significant developments on Pensions. During all the previous negotiations Royal Mail had refused point blank to agree to having just one pension scheme for all.However, during the negotiations which the Mediator was facilitating, Royal Mail agreed to the principle of one pension scheme for all.Royal Mail and the CWU are still working on the details of the scheme but the following has been agreed.

A) That there will be one pension scheme for all.

B) That All Basic Pay and pensionable allowances will count towards pensionable pay.

C) This will significantly benefit those individuals who joined after April1987 and are in the old POPS scheme as their first £4000 of their basic wage is not pensionable. Under this scheme, it will be. This will benefit 88,000 members of the 93,000 in the current DB scheme who joined after 1st April 1987.

D) All DC scheme members will be in the new scheme and will for the first time have their pensionable allowances count towards their pension.The above scheme will be a collective defined ambition Pension scheme which will guarantee a wage in retirement and there will be an element of shared risk. 

This new scheme needs changes to the Pension Regulations and Royal Mail and the CWU will lobby the Government to have these changes introduced.

The above represents significant progress. However, a lot more of the detail needs to be clarified before there is an agreed and legally binding commitment on pensions.
Both the union and Royal Mail recognises that whilst we are lobbying the Government for the changes to be made to allow for the Pension regulator to approve of such a pension scheme, we will need transitional arrangements prior to the 31st March 2018 when the Defined Benefit scheme closes.

The transitional arrangements could be that we simply agree an extension to the DB scheme closure date. However Royal Mail has offered the following as an interim measure;
. All current DB members get transferred into a Defined Benefit cash balance scheme;

. That any member who is in the DC scheme who has been in Royal Mail for 5 or more years would be also moved into the Defined Benefit Cash balance scheme;

. That all remaining members in the Defined Benefit scheme who had done more than 12 months would be auto enrolled onto the highest level which attracts Royal Mail’s contribution of 10%.

[fishtank]

I've melted my brain with a lot of this but I'm starting to see some very dodgy manoeuvring on Royal Mail's part.

Closing the DB scheme and moving us all into a pure DC plan was never Royal Mail's intention.

To us posties this seems like a no brainer, you would think that this would de-risk the company from all pension liabilities but it doesn't, what it creates is a locked pension fund with negative cash flow as employer and employee are no longer making contributions because a DC scheme is based on individual pension pots and existing pensions still have to be paid. A pension fund with negative cash flow has only one option, to sell assets and this opens the fund up to de-investment risk. Basically if you can't sell assets for at least what you paid for them you're well and truly screwed.

Enter the conditional Combined DC/with DB element scheme or what the CWU are rather sweetly calling the Collective Ambition Scheme ( have they trademarked that? ). I'm assuming into that will go the assets and liabilities from the current DB scheme and perhaps the option of transferring the personal pension pots of DC members. Since this solution provides both a continuation of positive cash flow thus removing the danger of de-investment shortfall and a huge reduction in base line guaranteed pension provision reducing the danger of negative cash flow it ticks all the boxes for Royal Mail.

It will be promoted in this way.

Although the baseline pension Royal Mail are offering is s**t if the markets perform* and we pick the right investments at the right time it could be a lot better, it might even be a "wage in retirement".

* markets can go down as well as up....blah blah blah ....terms and conditions apply.

[rogersh]

A bit more detail here...

. That any member who is in the DC scheme who has been in Royal Mail for 5 or more years would be also moved into the Defined Benefit Cash balance scheme;

.

Mediators Report states;

Appendix B

Royal Mail Pension Proposal -the transitional arrangements

"From 1 April 2018, a single DB Cash Balance Scheme will be made available to all employees who have worked for Royal Mail for a qualifying period. This is a Collective arrangement with a single asset pool for members. An enhanced DC pension scheme will be provided for employees during the qualification period.

Key features:

DBCB lump sum scheme, from 1 April 2018

Eligibility - RMPP members. Other employees who have completed 5 years contributions to the DC plan following elevation from the nursery scheme will be given the option to join."


Just for clarity FT, Although I would have completed 5 years next month, I entered the DC scheme in 2014 after 1 year in the "nursery" scheme. So I would not be eligible having only 4 years in the standard section of the scheme.

[fishtank]

Although the details are still being worked on at the moment it looks like you would be ineligible to join in March 2018. What happens after that...who knows?