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Experts dismiss Royal Mail hybrid pension proposal

15 Mar 2017, 16:06

https://www.ftadviser.com/pensions/2017 ... -proposal/

An expert has dismissed as "badly thought out" a union proposal that would see Royal Mail create a hybrid pension scheme combining elements of defined benefit and defined contribution.
Independent pension consultant John Ralfe said the Communication Workers Union proposal, revealed yesterday (14 March), failed to accept the fact that the DB model was "dead".

According to the proposal, the new Royal Mail scheme would pay members a guaranteed income in retirement, but would not guarantee annual indexation of benefits, either in the accumulation phase, or the retirement phase.

Instead, the trustees would review the scheme's investment returns annually, and decide accordingly whether it could afford to increase benefits that year.

Terry Pullinger, deputy secretary general of postal at the CWU, told FTAdviser this would allow the scheme to invest much more heavily in growth assets, putting as much as 100 per cent in equities..

"The scale of the investment in equities is debatable, but it will be much more aggressive than the current strategy which is totally derisked," he said.

But Mr Ralfe said such an investment strategy would simply not work.

"This is a badly though-out proposal from the CWU," he told FTAdviser.

"It requires the Royal mail pension scheme to invest heavily in equities, which simply increase the risk of a deficit for the company - exactly what it is trying to avoid.

"If the CWU wants the company to bet on equities, well say so, and suggest they play the futures market," he said.

He said that even with no inflation guarantee, the annual company cost would be high and would have to be invested in matching bonds to make sure there was little risk of a deficit.

This, he said, meant there would be no potential upside to pay inflation increases.

"The CWU and other unions should accept that DB is dead in the private sector. Rather than trying to get Royal Mail to continue to take the risk of running a DB scheme, CWU should negotiate a more generous DC contribution than 10 per cent," he said.

John Broome Saunders, actuarial director at pension consultancy Broadstone, agreed that the company was unlikely to accept that much risk.

"If you were investing in DC, you might well invest in 100 per cent in equities. But as soon as you introduce a minimum guarantee, the risk of equities certainly looks rather high."

He said for a conditional indexation model to work, it would require very specific agreements on exactly how the risk was shared to avoid future disputes between employee and employers.

Overall, he said he did not see such hybrid models taking off.

"They've been talked about for a while, but nobody has a model that works. Most employers have had their fingers burnt with DB, and they don't want to take on anymore pensions risk."

Mr Broome Saunders added that pension freedoms had "cemented" the move towards DC.

Experts dismiss Royal Mail hybrid pension proposal

15 Mar 2017, 16:45

obviously they are going to reject the unions proposal outright then. he's probably on the RM board!!....or moyas bitch. :Very Happy

Experts dismiss Royal Mail hybrid pension proposal

15 Mar 2017, 17:51

Can't afford it or won't afford it ?

Annual profits say to me that its the latter.

Experts dismiss Royal Mail hybrid pension proposal

15 Mar 2017, 18:11

TrueBlueTerrier wrote:
Overall, he said he did not see such hybrid models taking off.



Yes - but what he doesn't say is that the reason hybrid models may well not take off is due to the fact that unionisation, unity and effective collective bargaining are at an all time low in the UK ie. TPTB have the labour force over a barrel

Of course the financial climate has changed post 2008 - the BofE is printing money as if its going out of fashion, alongside imposing zero percent interest rates. Combined these two things are placing increasing pressure on traditional DB schemes, without a doubt.

However, the unions proposal is a means of circumventing these problems.

No - for me, the real reason for the death of DB schemes and the unlikelihood of hybrid schemes taking off is that labour is disorganised.

The Union proposal is affordable.

The time to fight back is now.

Experts dismiss Royal Mail hybrid pension proposal

15 Mar 2017, 19:58

It's all about de-risking for RM, the share holders want RM as a cash cow and this pension will only hinder the master plan.

We must take industrial action and knock the share price down to give them a good kick in the bollocks.

RM are now 200% reliant on overtime, we have them in the palm of our hand and we must now exercise that power to get what we want.

Experts dismiss Royal Mail hybrid pension proposal

15 Mar 2017, 20:48

Well said that man

Experts dismiss Royal Mail hybrid pension proposal

15 Mar 2017, 22:33

Phantom wrote:It's all about de-risking for RM, the share holders want RM as a cash cow and this pension will only hinder the master plan.

We must take industrial action and knock the share price down to give them a good kick in the bollocks.

RM are now 200% reliant on overtime, we have them in the palm of our hand and we must now exercise that power to get what we want.


I agree. For me the problem is the staff themselves. Looking through the posts on here regarding pensions, and knowing what some of my colleagues are like in our office for spending their money, I cannot see that happening too soon. Loads of people in RM think short term. Some run out of money before the end of the week, let alone month. Builders, postmen, etc seem to come from a certain type of person. They tend to think short term, probably down to upbringing, a typical working class mentality. Nothing wrong with working class. I come from just such a family, but mentality has to change regarding people thinking about their future.

Experts dismiss Royal Mail hybrid pension proposal

16 Mar 2017, 13:31

:Very Happy

Experts dismiss Royal Mail hybrid pension proposal

21 Mar 2017, 19:25

Royal Mail have not been stupid the last ten years new people already on rubbish pension they are confident in getting a no strike vote over to you cwu get the ballot out now may as well.

Experts dismiss Royal Mail hybrid pension proposal

21 Mar 2017, 19:56

I agree, been with RM for nine years on new scheme. Ironic that the guys who need our support now are the guys who allowed the intro of the new scheme ten years ago. No talk of strike action then was there. Pretty certain majority of employees with less than ten years service will not support a vote for action. What comes round......

Experts dismiss Royal Mail hybrid pension proposal

21 Mar 2017, 20:59

Not even in support of a proper pension scheme for themselves - instead of the glorified savings scheme that pays a pittance in retirement that they have now ?

Yeah - what goes around comes around - and if you aren't prepared to stand up for yourself now then you will, as sure as night follows day. be shat upon later.

Experts dismiss Royal Mail hybrid pension proposal

22 Mar 2017, 16:01

therailway wrote:I agree, been with RM for nine years on new scheme. Ironic that the guys who need our support now are the guys who allowed the intro of the new scheme ten years ago. No talk of strike action then was there. Pretty certain majority of employees with less than ten years service will not support a vote for action. What comes round......

Factually wrong, but if you subscribe to the apparently conservative view of screw them before they screw me, your support won't be missed.

You really shouldn't rely on the managers for your information. :chuckle


http://news.sky.com/story/royal-mail-st ... r-10431319 ballot for strike Action partly over pensions in 2013

RMCs own poll over the changes in 2008 viewtopic.php?f=27&t=9850

and over 3 pages of various threads re the pension changes viewforum.php?f=27&start=960

If you think thats nothing............. <shrugs>

Experts dismiss Royal Mail hybrid pension proposal

22 Mar 2017, 17:11

OK perhaps I did get some facts wrong, however the changes went through without strike action I believe. Putting that to one side it is essential that the CWU informs all of its members of not only the current issues but also educates the uneducated (me and many others) of historical events. The main point I was making was that employees of less than ten years service remain cynical and are unlikely to commit to strike action. Perhaps if there were better lines of communication then a more informed judgement could be made. Truce? :Very Happy

Experts dismiss Royal Mail hybrid pension proposal

22 Mar 2017, 21:05

I know that the bulk of RM employees at my office won't vote for a strike. The union support is nil and the local rep hasn't got a clue. There has been no mention of any union alternative pension scheme and its only me passing on information from this forum. And they don't listen to me! And the Management just hint at their huddles that there will very little difference to any new pension scheme!! :roll:

Experts dismiss Royal Mail hybrid pension proposal

22 Mar 2017, 22:36

fly-catchers wrote:I know that the bulk of RM employees at my office won't vote for a strike. The union support is nil and the local rep hasn't got a clue. There has been no mention of any union alternative pension scheme and its only me passing on information from this forum. And they don't listen to me! And the Management just hint at their huddles that there will very little difference to any new pension scheme!! :roll:


Tell them that if they don't support industrial action they are talking themselves out of up to £5k a year when they get old. And that that £5k they are wilfully denying themselves by their apathy will go straight into the pocket of the 1%.

Ask them if they are that well off that they can afford to have £5k a year ponced off them.

Tell them to grow a pair.

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