MRM.COM : Our agreement on pensions

[POSTMAN]

https://www.myroyalmail.com/news/2018/0 ... t-pensions" onclick="window.open(this.href);return false;

Our new pension arrangements will target, but not guarantee, a similar level of benefits to those currently provided by the Royal Mail Pension Plan (RMPP)1.

Risk will be shared between members and the Company. These are significant moves from the Company’s original Defined Contribution proposal.

Key points

We are committed in principle to the future introduction of a Collective Defined Contribution scheme2, subject to necessary legislative and regulatory changes. Royal Mail and CWU will lobby Government to make the necessary changes so a CDC scheme can be established. A Defined Benefit Cash Balance Scheme (DBCBS) will sit alongside it..
While we seek these changes, we will implement transitional arrangements. They will continue to provide good quality pension benefits for RMPP and Royal Mail Defined Contribution Plan (RMDCP) members.
Collective Defined Contribution (CDC) scheme

We have announced our commitment in principle to the future introduction of a CDC scheme with a Defined Benefit Cash Balance Scheme (DBCBS)3, sitting alongside it. The Company would contribute 13.6% of pensionable pay and members would contribute 6%.

It is anticipated that a CDC scheme would provide significantly better outcomes than a traditional Defined Contribution scheme.

How do CDC schemes work?

CDC schemes have fixed contribution rates from the employer and members
Share investment and longevity risk is pooled between members
CDC schemes have a target for what the employee will receive in retirement. This target is not guaranteed.
The scheme itself pays members a pension, rather than members having to buy an annuity. Actual benefits payable depend on the scheme’s investment performance.

RMPP and RMDCP members will get a letter and booklet in the coming weeks. They explain our pensions agreement in detail.

1 Sections B and C of the Royal Mail Pension Plan close to future accrual in the current form on 31 March 2018.

2 Collective Defined Contribution (CDC) schemes have fixed contribution rates from the employer and members, but pool investment and longevity risk between members. There is a target for what the employee will receive in retirement but this target is not guaranteed. The actual benefit payable will depend on the scheme’s investment performance. There is no need for scheme members to buy an annuity on retirement, as the scheme pays the pension. But that pension, and any future increases to that pension, are not guaranteed, and will depend on the scheme’s investment performance. The combination of these features makes for a more efficient design for members when compared with a pure Defined Contribution scheme, but with no benefit guarantees to be underwritten by the employer. The primary legislation for this type of scheme is in place (through the Pension Schemes Act 2015), but the secondary legislation has not been enacted. CDC schemes are already used in countries such as the Netherlands and Canada.

3 Under the Defined Benefit Cash Balance Scheme, the Company guarantees a minimum lump sum at normal retirement age. Members are guaranteed to receive the total value of the contributions paid towards their lump sum up to retirement. In addition, discretionary increases will be applied up to retirement, subject to the investment performance of the scheme. Once applied, these increases will also be guaranteed.

Our Agreement on Pensions Colleague Update...
https://www.myroyalmail.com/sites/defau ... ons_V7.pdf" onclick="window.open(this.href);return false;

Pensions Q&A...
https://www.myroyalmail.com/sites/defau ... nsions.pdf" onclick="window.open(this.href);return false;

[POSTMAN]

https://www.myroyalmail.com/news/2018/0 ... pensions-0" onclick="window.open(this.href);return false;

Transitional arrangements from 1 April 2018

The Royal Mail Pension Plan (RMPP) will close to future accrual in its current form on 31 March 2018. A new Defined Benefit Cash Balance Scheme (DBCBS) will be set up as part of the RMPP.

RMPP members will be enrolled into the DBCBS on 1 April 2018.

What is the DBCBS?

The Company guarantees a minimum lump sum at age 65, based on Company and member contributions. In addition, DBCBS targets discretionary increases to the lump sum each year, dependent on investment returns. Once credited, these increases are also guaranteed.
Assets are pooled, and investment returns are shared across the members.
The Company will contribute 13.6% of pensionable pay, plus 2% for other member benefits including death in service and ill health. Members will contribute 6%.
We’re seeking Government approval for one aspect of the DBCBS to allow it to work more efficiently for members.
If preferred, RMPP members can instead opt to join the improved RMDCP.

RMDCP members

The Company’s contribution to the RMDCP will be increased by 1% in each standard tier, up to a maximum of 10%.
We will move current and future RMDCP members in the standard section to the improved top tier (10% from the Company, 6% from the member).
RMDCP members with a minimum of five years’ service, including four years contributing to the standard section, can choose to join the DBCBS.
RMDCP contributions: the facts

IMPROVED RMDCP standard tier contributions

Pensions.PNG

[fishtank]

As far as I can make out the intend to run the cash balance scheme alongside the new CDC scheme and the DC scheme.

[Rumple]

As far as I can make out the intend to run the cash balance scheme alongside the new CDC scheme and the DC scheme.

They're a bunch of scheming so and so's.

[RobertT]

As far as I can make out the intend to run the cash balance scheme alongside the new CDC scheme and the DC scheme.

No Fish, i think that's wrong! Initially it will be the Cash Balance scheme and the DC scheme alongside each other, with us having the choice which one to join.

When/if the required legislation is agreed, the Cash Balance scheme will close and be replaced with the CDC scheme.

The last sentence of the agreement says: ‘After 12 months a judgement will be made on the likelihood of the new scheme being introduced within reasonable timescales or whether we reopen talks to develop a new resolution for pensions’.

So unless the government are forthcoming with the legislation relatively quickly, the proposed CDC scheme may never see the light of day.

[fishtank]

It's just this paragraph Robert...

Royal Mail and CWU will lobby Government to make the necessary changes so a CDC scheme can be established. A Defined Benefit Cash Balance Scheme (DBCBS) will sit alongside it..

I'm assuming that's what will provide the gauranteed DB lump sum element of the scheme but how it will work is anyone's guess. A bit short on details.

[RobertT]

The way I read things is:

The DBCB builds up a lump sum alongside the existing RMPP benefits. It’s basically the same as a DC scheme except there’s an element of guarantee with the final amount. It’s no different to RM’s proposals of a few months ago.

The CDC will not form part of the RMPP and provides both a lump sum which grows at an accrual rate of 3/80ths and a pension which grows at 1/80ths.

The two lump sums build up in different ways and provide two lump sums as part of two separate schemes.

As ever with RM, the info provided doesn’t tell us everything we want to know.

[TheTrolleyMan]

It's still too unclear so that's why we have to vote NO !