CWU: Royal Mail CDC possible without legislation

Post by **TrueBlueTerrier** » 26 Jan 2018, 14:16

https://www.professionalpensions.com/pr ... egislation" onclick="window.open(this.href);return false;

Collective defined contribution (CDC) arrangements could be set up without needing any legislation, which would speed up and make the process easier, the Communication Workers Union (CWU) has claimed.

Existing defined contribution (DC) legislation could instead provide the framework for CDC, the union claimed as it said it has reached a "negotiator's agreement" with Royal Mail for such a scheme.

CDC has been suggested as a "pragmatic" solution to Royal Mail Pension Plan's worsening funding position.

The company last year announced the plans to close the defined benefit (DB) fund after predicting contributions to the scheme would surge from 17% to 50% of pay, using up the entirety of the scheme's actuarial surplus recorded in its 2015 triennial valuation, without taking action.

While it would not eliminate any potential future deficit in the scheme, closing and replacing it with a CDC arrangement would limit any growth while providing more security and certainty to employees about their retirement provision, the CWU has argued.

The proposed agreement, described as being "on the cusp of something special", is now expected to be put to members shortly, although it may take some time for the scheme to be set up, especially if secondary legislation is found to be required.

Speaking at a Westminster Business Forum conference on 25 January, deputy general secretary for postal Terry Pullinger, who has been leading the CWU's negotiations with Royal Mail, said waiting for legislation "could take anything up to three years".

"Some of the work we are doing and who we are trying to work with [say] that it won't require the full secondary legislation," he said, explaining the framework could to some extent be enabled through existing DC legislation.

"If it is possible that the current DC legislation could serve to enable us to do this, then there might be a shortcut for us going first. It is absolutely crucial."

It would be important to set the scheme up as quickly as possible, Pullinger warned however, or members' trust would be damaged, cautioning: "If nothing has changed within a year, or we can't see it coming into the horizon, then we have to take a judgement to see if our dispute is actually resolved or not."

"Can you imagine us explaining to the members ‘we have this deal but it might never arrive'?" he asked, before adding: "I don't see there should be inertia on this. We need to get something going."

Pullinger revealed that the proposed arrangement would include a DB element, which would be paid out as a 25% tax-free lump sum, while a "wage in retirement" aspect would be accrued under a CDC arrangement, based on a 3/80th accrual rate. Within the scheme, into which all staff would be auto-enrolled, benefits would be uplifted on an annual basis, with the scheme confirming once a year what the uplift would be.

Pullinger said, for this reason, it was important both the employer and the unions were "honest and upfront" with members.

"We want to do this; Royal Mail wants to do it," he continued. "Someone has to go first if you want to make a difference. We may stumble and fall [but] I would like to believe we could do huge justice and give this community something to learn by. We believe that it is the right answer for us."

He warned, however, that CDC may not be the "answer for everybody" but hoped Royal Mail would provide some evidence of its viability.

His comments came as the Work and Pensions Committee's inquiry into CDC schemes continues, with a report due later this year.

fishtank · Post by **fishtank** » 26 Jan 2018, 14:34

based on a 3/80th accrual rate.

I'm assuming that's a typo.

Post by **rogersh** » 26 Jan 2018, 16:41

fishtank wrote:
based on a 3/80th accrual rate.
I'm assuming that's a typo.

Assuming you assume it should be 1/80th? - as is the norm

Post by **RobertT** » 26 Jan 2018, 16:55

The way I understand it is that, the lump sum element of the CDC proposal is defined benefit, similar to the cash balance scheme. So I assume the 3/80ths refers to that. Although I know the article doesn’t say that!

Many DB schemes have a 1/60ths or 1/80ths accrual rate for the pension element and also a 3/80ths or similar accrual rate for the lump sum, so that wouldn’t be anything new.

The ‘wage in retirement’ element is not defined benefit because that is dependent on investment returns.

That’s my understanding anyway. Although without any firm information forthcoming for at least a few more days, I could be wrong and it might be a typo.

Post by **cloherty1976** » 26 Jan 2018, 17:06

RobertT wrote:The way I understand it is that, the lump sum element of the CDC proposal is defined benefit, similar to the cash balance scheme. So I assume the 3/80ths refers to that. Although I know the article doesn’t say that!

Many DB schemes have a 1/60ths or 1/80ths accrual rate for the pension element and also a 3/80ths or similar accrual rate for the lump sum, so that wouldn’t be anything new.

The ‘wage in retirement’ element is not defined benefit because that is dependent on investment returns.

That’s my understanding anyway. Although without any firm information forthcoming for at least a few more days, I could be wrong and it might be a typo.

Isn't the 80th part going back to the times of pension before 1987?

Post by **RobertT** » 26 Jan 2018, 17:20

cloherty1976 wrote:Isn't the 80th part going back to the times of pension before 1987?

Section B has an accrual rate of 1/80ths and a lump sum of 3x pension. While with section C its 1/60ths and no lump sum, unless you give up some pension to get one.

But if it’s the CDC lump sum we’re talking about here as I suggest, then we’re talking about something totally different to what’s currently available with RM pensions. And I assume the accrual rate of the lump sum would be 3/80ths of your pensionable pay per year.

But like I say, without any firm info, we can currently only surmise.

k979aaa · Post by **k979aaa** » 26 Jan 2018, 19:50

The biggest problem for us all is all UK governments they have all tried to privatise us stole dividends at the expense of the workforce since 1987 and the pension change the whole system was sustainable but they knew best? How many pension schemes do we need in thirty years three four five or six or none at all whist the rich get richer of our own backs! This is a shambles CEO'S with millions yet the workers get screwed ex BHS ex Carilion ex Mirror group next it will be us mark my words this is not the end bland assurances do not cut it with me!

Post by **nataddick** » 27 Jan 2018, 08:27

They were proposing 2 different accrual rates - one for the pension and the other for the lump sum :-

Target CDC Pension - 1/80th of pensionable pay plus RPI revaluation. NOTE : CWU originally wanted a 1/60th accrual rate !

Guaranteed DBCDS Lump Sum - 3/80th's of pensionable pay, with revaluation to date.

This is contained in LTB 658/17 - Update on External Mediator's Report - Appendix A - Royal Mail Pension Proposal - the longer term solution. Page 21, dated 17 November 2017.

As Robert says - that was then - the talks may have changed the basis again. It nevertheless would account for the misleading and incomplete press reference.

Post by **RobertT** » 27 Jan 2018, 08:49

Yes, I almost forgot about the mediators report! Thanks nataddick.

The whole thing can be downloaded here. Or if you just want the pensions report, I actually copied and pasted it on this thread!
I must be getting old!

But sadly not old enough to retire just yet.

We’ll have to wait and see how the final proposal compares.