CWU and Royal Mail finalise UK's first CDC scheme

The Communication Workers Union has endorsed the terms of an agreement on pensions and pay with Royal Mail Group, it has been confirmed.

Following months of talks, the deal, which has been unanimously agreed by the CWU’s postal executive, will be recommended to the union’s 110,000 postal members in a national ballot.

In a video update to members in January, CWU deputy general secretary postal Terry Pullinger confirmed that the union had reached a “negotiators agreement with Royal Mail Group on all of the issues of concern.”

The agreement was then passed on to the Postal Executive, whereby it was assessed in a two-day executive meeting.

The new pension scheme will be the UK’s first collective defined contribution pension and will offer a guaranteed cash lump sum. The CDC scheme will be launched subject to necessary legislation.

The Royal Mail defined benefit pension scheme will close, as planned, on 31 March 2018. The firm's cash balance scheme will offer a 13.6 per cent employer contribution and contributions for members of the existing defined contribution scheme will be increased.

In addition, Royal Mail and the members union have agreed on a three-year pay deal and two-hour cut in the working week.

Pullinger said: “This agreement represents the successful outcome of months of talks and is testament to the strength of membership support reflected in the union’s huge vote for strike action in October last year. The success of our campaign has delivered a substantial pay rise, a shorter working week and a pioneering new pension scheme that will secure our members’ future employment, standard of living and retirement security.

“In the face of the tough challenges Royal Mail faces from gig-economy competitors, unfair regulation and automation, we have reached a settlement that builds a bridge from our current agreements to the future, is progressive and reflects leading-edge solutions in a challenging modern setting. It will also ensure that any future change is managed through a process of evolution not revolution that will protect the interests of all members.”

Also commenting on the agreement, Hargreaves Lansdown head of policy Tom McPhail said: “As an employee, if you’re going to lose your final salary pension scheme, this is a pretty good way to do it. The ongoing employer contributions at £400 million and 13.6% of salary are very generous compared to the majority of Defined Contribution schemes. For members of the Cash Balance scheme there will still be an element of certainty around their benefits. The plans to launch a CDC scheme will be watched with keen interest by the pensions industry, which has very mixed feelings about the viability of such schemes.”

    Share Story:
Spotlight on pensions tracing: making huge strides in a changing world
Alex Mitchell, Head of Tracing & Data Solutions at Capita, meets Francesca Fabrizi, Editor in Chief of Pensions Age to discuss recent trends in the pensions tracing space

MAC strategies in focus
Francesca Fabrizi meets Craig Scordellis, Head of Long-Only Multi-Asset Credit at CQS, to discuss what MAC strategies can offer pension schemes today