A separate vote for the final pension proposal?

[NewPostieUK]

when/if it arrives .

Exactly.

We vote yes, it doesn't happen, then what?

[(and yes, I know it's dependent upon various things)

Exactly.

We vote yes, it depends on various things, it doesn't happen. then what?

As I said, we need something solid, definite, black and white, guaranteed, to vote yes or no.

[nataddick]

dandydon - will do but deep down I suspect that the plan (now jointly agreed by RM/CWU) is to discourage enlarged membership of the more flexible DC option with an equivalent employer contribution, as they need the membership numbers to make the CDC viable.

RMPP members now by default join the DC cash balance scheme. It is now evident that this scheme will morph into the guaranteed DB element of the proposed CDC scheme. Coincidence ?

[RobertT]

RMPP members now by default join the DC cash balance scheme. It is now evident that this scheme will morph into the guaranteed DB element of the proposed CDC scheme. Coincidence ?

The lump sum element of the CDC scheme has now been renamed the Defined Benefit Lump Sum Scheme (DBLSS), to distinguish it from the transitional Defined Benefit Cash Balance Scheme(DBCBS).

The DBCBS will be part of the RMPP and the CDC will be a separate scheme alongside the DBLSS, that should now dispel any confusion between the two.

Details taken from My Royal Mail:

The agreement in principle with CWU aims to provide innovative retirement benefits.

It would provide one scheme for all Royal Mail employees.

We have committed in principle to a Collective Defined Contribution (CDC) scheme (1), with a Defined Benefit Lump Sum Scheme (DBLSS) (2) sitting alongside it. Together they would target, but not guarantee, a similar level of benefits to those currently provided by the Royal Mail Pension Plan (RMPP). The CDC scheme is subject to legislative and regulatory changes being made.

Royal Mail and CWU have already begun lobbying Government to make the necessary legislative and regulatory changes so a CDC scheme can be established.

While we seek a CDC scheme, we will implement transitional arrangements. They will continue to provide good quality pension benefits for RMPP and Royal Mail Defined Contribution Plan (RMDCP) members.

Click here to read your ‘A ground-breaking agreement: Pensions’ Colleague Update.

For more information, watch RMtv and visit myroyalmail.com

1 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 CDC scheme requires certain legislative and regulatory changes to be made before it can be established.

2 We have previously referred to the DBLSS as a ‘Defined Benefit Cash Balance Scheme’ (DBCBS). It has been renamed as the DBLSS to distinguish the CDC arrangements from the transitional DBCBS. The scheme, and the way that it would work, has not changed.

[fishtank]

So what happens to the DBCBS when the DBLSS kicks in? Is it just going to sit there doing nothing?

[RobertT]

So what happens to the DBCBS when the DBLSS kicks in? Is it just going to sit there doing nothing?

It's going to help provide the tax free cash from your main RMPP benefits, in a similar way to AVC's.
Presumably it will continue to (hopefully) increase as stated in the agreement by CPI + 2% per year.

[fishtank]

So what happens to the DBCBS when the DBLSS kicks in? Is it just going to sit there doing nothing?

It's going to help provide the tax free cash from your main RMPP benefits, in a similar way to AVC's.
Presumably it will continue to (hopefully) increase as stated in the agreement by CPI + 2% per year.

So the exact same as the DBLSS?

[RobertT]

So what happens to the DBCBS when the DBLSS kicks in? Is it just going to sit there doing nothing?

It's going to help provide the tax free cash from your main RMPP benefits, in a similar way to AVC's.
Presumably it will continue to (hopefully) increase as stated in the agreement by CPI + 2% per year.

So the exact same as the DBLSS?

The DBLSS accrues at the rate of 3/80ths of pensionable pay to provide the CDC lump sum and has targeted returns of RPI.

The DBCBS is effectively a DC pot of money with a guaranteed minimum payout alongside the RMPP, with a targetted return of CPI+2%.

The CDC/DBLSS is separate from the RMPP/DBCBS.

[fishtank]

See this is the bit I don't understand, why set up a Defined Benefit Cash Balance Scheme is an interim measure then set up another Defined Benefit Cash Balance Scheme (call it what you want, that's what it is) and close the other one to future accrual but still have all the admin costs of investing two separate DBCBS schemes? Would you diversify the investments or twin them?

[fishtank]

The CDC/DBLSS is separate from the RMPP/DBCBS

.

There is no CDC/DBLSS.

The two things are oil and water. One is DC and the other DB, they will "sit alongside each other" but will have to be entirely separate. So the RMPP DBCBS will be entirely separate the new DBCBS. Seems like a missed opportunity to me and more unnecessary complication in our pension version of War and Peace.

[Aquarius]

My heads starting to hurt with all these names/acronyms

Talk about vague and confusing and convoluted

[Aquarius]

dandydon - will do but deep down I suspect that the plan (now jointly agreed by RM/CWU) is to discourage enlarged membership of the more flexible DC option with an equivalent employer contribution, as they need the membership numbers to make the CDC viable.

RMPP members now by default join the DC cash balance scheme. It is now evident that this scheme will morph into the guaranteed DB element of the proposed CDC scheme. Coincidence ?

Thanks for the reply - i agree with your assessment - nice to see that choice perhaps being taken away from us.

I wonder if it was RM or CWU who pushed for that !

I can guess

[RobertT]

See this is the bit I don't understand, why set up a Defined Benefit Cash Balance Scheme is an interim measure then set up another Defined Benefit Cash Balance Scheme (call it what you want, that's what it is) and close the other one to future accrual but still have all the admin costs of investing two separate DBCBS schemes? Would you diversify the investments or twin them?

The DBCBS is transitional for 2 reasons:

1. The stated aim is to open a CDC scheme for the longer term and they’ve got to offer something in the meantime. The alternative would presumably be DC, so for most RMPP members DBCBS is almost certainly better.
2. The DBCBS only has a limited lifespan, due to it increasing RM’s liabilities within the RMPP - the mediators report mentions it!

There may well be admin costs, but that would just be part of the overall admin cost of all RM’s pension schemes. I can’t see that being massive.

Whether there would be additional investment costs of a closed scheme and an open scheme, compared with just one open scheme, is debatable. The fund managers are going to take their cut either way!

As the targeted returns are slightly different I would imagine the investments may well vary between the two. But when there’s hundreds of £milions being invested each year, there will always be a fairly wide selection of fund managers in charge of our money anyway. The RMPP currently has about 30 I think!

[RobertT]

The CDC/DBLSS is separate from the RMPP/DBCBS

.

There is no CDC/DBLSS.

The two things are oil and water. One is DC and the other DB, they will "sit alongside each other" but will have to be entirely separate. So the RMPP DBCBS will be entirely separate the new DBCBS. Seems like a missed opportunity to me and more unnecessary complication in our pension version of War and Peace.

You can say the same thing with the current RMPP(DB) and AVC’s(DC).

[fishtank]

2. The DBCBS only has a limited lifespan, due to it increasing RM’s liabilities within the RMPP - the mediators report mentions it!

Were RM not offering this exact same DBCBS scheme as the final pension solution before they entered mediation?

[RobertT]

2. The DBCBS only has a limited lifespan, due to it increasing RM’s liabilities within the RMPP - the mediators report mentions it!

Were RM not offering this exact same DBCBS scheme as the final pension solution before they entered mediation?

Yes! Which begs the question, would its introduction have created a deficit and more problems further down the line?

I can only assume RM didn’t really cost the scheme properly until the protracted talks/mediation, when things were looked into properly with the help of actuaries, etc, hence why they seem so keen to introduce the CDC. Because although the funding of the DB lump sum is down to them, they also know that the ‘wage in retirement’ element shouldn’t in theory have any comebacks for the business.