Royal Mail details CDC contribution levels

[RobertT]

https://www.professionalpensions.com/ne ... ion-levels

CDC section will offer additional employer contributions for lump sum payments

Details on how employee contributions will work in the planned Royal Mail Collective Pension Plan (RMCPP) have been outlined.
In the half year end results for Royal Mail, published today (18 November), the postal company outlined more information on its current scheme, which will contain both its long-awaited collective defined contribution (CDC) section and its defined benefit (DB) lump sum (DBLS) offering.

Based on current expectations, Royal Mail said accounting treatments for the two sections of the scheme are expected to be similar to its transitional DB cash balance scheme (DBCBS).

The new arrangements will have fixed employer contributions of 13.6%, as well as an additional 1% for employees who choose to save an additional lump sum payment. The standard employee contributions will be 6%.

"We have, for some time, been working closely with Communication Workers Union and other stakeholders to make CDC a reality for Royal Mail and its people," the group said.

Royal Mail confirmed it expected to contribute £120m into its defined contribution plans in the next financial year. Total employer contributions for all Royal Mail Schemes - including £270m for the DBCBS and the now-closed Royal Mail Pension Plan - will therefore be around £390m for the 2021/22 year.

It comes ahead of the closure this Sunday (21 November) of a consultation launched in September by Royal Mail with its unions and staff on the CDC scheme.

It is hoped the RMCPP will launch next year if the consultation has a positive response, authorisation is granted by The Pensions Regulator, and the Department of Work and Pensions finalises regulations around it.

The creation of CDC schemes was legislated for earlier this year under the Pension Schemes Act 2021.

[Jaggs]

Has it been announced who will run the scheme? Is that the sort of decision that will be made much nearer the actual opening of the scheme.

[RobertT]

Has it been announced who will run the scheme? Is that the sort of decision that will be made much nearer the actual opening of the scheme.

Trustees will run it, as they do with the RMPP, and they will be responsible for the schemes investments. Those trustees haven't been appointed yet.

The RMPP currently has at least 30 different fund managers investing our money and I expect CDC will be similar.

RM will be responsible for the DBLSS just as it is for the current DBCBS.

[Jaggs]

Has it been announced who will run the scheme? Is that the sort of decision that will be made much nearer the actual opening of the scheme.

Trustees will run it, as they do with the RMPP, and they will be responsible for the schemes investments. Those trustees haven't been appointed yet.

The RMPP currently has at least 30 different fund managers investing our money and I expect CDC will be similar.

RM will be responsible for the DBLSS just as it is for the current DBCBS.

Thank you for your reply. So it won't be like the RMDCP being run through a company like Scottish Widows although I guess any AVCs would have to go through a company like that.

[RobertT]

AVC's will be with either SW or a similar provider.

With about £600 million going into the CDC and DBLSS combined each year, they're going to spread the investments around quite a few fund management companies.

It's never a good idea to put too many eggs in one basket.

[yellowbelly]

AVC's will be with either SW or a similar provider.

With about £600 million going into the CDC and DBLSS combined each year, they're going to spread the investments around quite a few fund management companies.

It's never a good idea to put too many eggs in one basket.

Once when I was extremely bored I looked into the make up of one of the funds that my RMDCP is invested in
and below Scottish Widows who manage the overall plan I think I went down three levels of fund managers in one fund
i.e a the fund was invested in funds of other fund managers of funds of other fund managers etc. beggars belief
how many fund managers must be getting a slice of the pie without doing a great deal - that's why they all live in faux mansions in the
commuter belt around London.