Royal Mail 'on cusp of something special' with CDC plans

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The Communication Workers Union (CWU) and Royal Mail Group are very close to securing an agreement on a collective defined contribution (CDC) plan for all members.

The CWU was reporting on ongoing negotiations relating to the company's plans to shut the defined benefit (DB) Royal Mail Pension Plan (RMPP) to future accrual - as well as other issues such as pay and job security.

The company last year announced the plans to close the RMPP after predicting contributions to the scheme would surge from 17% to 50% of pay, using up the entirety of the scheme's £1.1bn surplus recorded in 2015, without action. The CWU called for "cool heads and steady hands" but added "we are on the cusp of something very, very special".

The comments were made in a video to its 110,000 Royal Mail members, where deputy general secretary for postal Terry Pullinger also warned "nothing is agreed until everything's agreed".

He cautioned that although negotiations were progressing, there was always the possibility that they would break down.

"We are either on the verge of something incredibly special and something that we could be extremely proud of as a union, and something that would totally respect the solidarity and support that our members and branches have given our members, or we will break down and we will enter a period of huge disruption as we fight for those issues."

This "something special" was said to include a CDC scheme which would be available for around 132,000 current DB and defined contribution members, and would be "based on a wage in retirement" with shared risk between members.

The company had originally intended to set up a ‘cash balance' scheme, where members would be guaranteed a lump sum on retirement based on 19.6% total contributions and discretionary increases dependent on investment performance.

However, in December the company announced its intention to consider adopting a CDC arrangement.

Pullinger warned the outcome of the negotiations depends on government action.

"We are already, us and the employer, lobbying and campaigning government, ministers and civil servants to get in place the right legislative framework for us to enable our scheme,"

The government introduced legislation allowing for CDC schemes in 2015, but secondary legislation is required to enable schemes to set up such a scheme, meaning Royal Mail's proposal cannot proceed without legislative change.

"The reason that hasn't been done thus far is because no-one has pushed for it, but we are now. And it is crucial to resolving our dispute," Pullinger said.

He added that, once the scheme is set up, there will be a "period of transition" for members of both DB and DC schemes.