Royal Mail to meet Pensions Minister to get CDC scheme 'through the door'

The Royal Mail and its workers union the Communication Workers Union are to meet with the DWP next week to discuss the implementation of its proposed collective defined contribution scheme.

Speaking before the Work and Pensions Committee yesterday, 21 February 2018, CWU national officer Ray Ellis stated that the union and Royal Mail are "jointly meeting the minister next week to make appropriate changes to existing legislation to enable the Royal Mail scheme to get through the door”.

The involved parties are set to meet the Minister for Pensions and Financial Inclusion Guy Opperman in the week commencing 26 February 2018.

It emerged earlier last year that Royal Mail’s current DB arrangements had become “simply unaffordable” therefore it proposed a new CDC plan for members following the closure of the final salary scheme in March this year.

Royal Mail group HR director Jon Millidge told the Committee: “Providing our people with great pensions is important to us and it is very clear that the current DB scheme that we have has become unaffordable.”

Ellis added that the CDC scheme will offer: “the potential for a similar level of outcome to the existing DB scheme for DB members, but at the same time, a substantially increased level of expectation for people in the DC scheme.”

Costs to the company to fund the existing DB scheme was £400m in previous years, with a projected cost of £1.2bn for this year. This is “more than the profit we make,” Millidge noted.

Moreover, legal technicalities will also need to be addressed to permit the scheme. To introduce the scheme as soon as possible, the HR director added that the company is currently “trying to identify what needs to change in terms of legislation in order to introduce this scheme.”

Royal Mail is sorting through the 2015 Pensions Act with lawyers and actuarial advisers to see what needs to change, Millidge detailed.

In terms of scheme governance, Ellis noted the importance of having people who benefit from the scheme “involved in the running” of it. In order to do this, the union and Royal Mail are to introduce a governing body that will oversee how the scheme is operating and look at pensions issues more generally. However, management will be the responsibility of the trustee board, he confirmed.

Millidge added that to make the scheme a success the company will ensure a “good, robust governance arrangement” that will be similar to the type of arrangement of a DB scheme.

Ellis concluded: “I’ve been persuaded that CDC schemes are the way forward on a much wider basis, but at the moment we need to get this scheme forward as quickly as we can to the benefit of our members.”

It is currently unclear when the new scheme, which will comprise of a 19.6 per cent contribution rate will be introduced.

However, the CWU is touring the UK to explain the deal to its members and equip them to outline this further to members in the workplace. In addition to this, Royal Mail will be providing its 140,000-strong workforce with a booklet detailing the new scheme.

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