Crunch time for Royal Mail pension plan

Post by **TrueBlueTerrier** » 04 Dec 2007, 13:20

http://news.bbc.co.uk/1/hi/business/7119055.stm

Analysis
By Ian Pollock
Personal finance reporter, BBC News

The recent industrial dispute at the Royal Mail may have ended.

But 165,000 staff at the group, including Post Office and Parcel Force employees, still face big changes to their pension scheme.

A formal consultation is going on until the middle of January among the group's staff - including postmen and women, counter staff, parcel delivery drivers and various supervisory and managerial staff.

The bald fact is that they will face a substantial cut in their prospective pensions, or will have to work for several more years to make up the difference, if the plans go through.

"The current cost of providing future service pensions is not sustainable," says the Royal Mail.

"We have to make changes to bring future pension costs to a more affordable and sustainable level."

In fact the company has revealed it hopes to save about Â£850m a year, the equivalent of the extra money it is paying in to offset the scheme's deficit.

The changes

The Royal Mail scheme is the largest pension scheme in the UK in which existing members, not just new joiners, have been told by their employer that they must accept changes which will see them worse off.

Earlier this month the Royal Mail sent a 44-page booklet to every employee spelling out the impending changes.

These are

* for a "career average" scheme to replace the current final salary version from 1 April next year

* for the standard retirement age to rise from 60 to 65 in 2010, though only for service after that date

* for new recruits, from January 2008, to be offered a separate "money purchase" scheme altogether

* for staff to keep contributing at 6% of salaries a year.

So what?

Well, the booklet's many tables make it clear just how much some existing postal staff may lose.

Doing the maths

Staff who are relatively close to retirement will see little change to their prospective pension as the entitlement they have built up so far will not be altered.

However the vast majority of Royal Mail staff are in Section C of the scheme, which is for those who have joined since 1987.

By definition they are the ones furthest away from retirement, and whose prospective pension will be most affected by the new arrangements.

Let's take the example of a 40 year old with just ten year's service now, earning Â£18,000 a year, retiring at 60, with wages rising in line with inflation.

According to the Royal Mail that employee's prospective pension would be cut from Â£8,079 to Â£6,697 - a drop of 17%.

To make up the difference, they would have to work an extra two years and ten months.

Wage rises above inflation

All that is assuming that wages from now until retirement go up in line with inflation of 3% a year.

The booklet's tables spell out how pensions will be affected if, in fact, a person's wages rise each year by an average of 1% above this inflation rate.

In this case our man or woman who retires at 60 would see their prospective pension cut from Â£10,060 under the final salary scheme to Â£7,864 under the career average version - a reduction of 22%.

The booklet does not say how much longer such a member would have to work to make up the shortfall, but postal staff can ask for a personal "quote" via the Royal Mail's consultation helpline.

Most postal grades of staff stay on basic pay grades for the whole of their careers and have few promotion prospects while there.

But in reality, over the long run, wages in most industries go up more than inflation, and that has been true at the Royal Mail.

According to Incomes Data Services, basic pay deals at the Royal Mail have amounted to 33.13% since October 1997, while the retail prices index has gone up by 30.9%.

Meanwhile about 12% of the Royal Mail's staff are in its supervisory and managerial grades, and most of them started off as postmen and women, sorting and delivering mail.

So, as their promotions will have pushed their wages ahead of inflation, they stand to lose most under the new arrangements.

Paul Reuter, an official of the Unite trade union that represents supervisors and managers, says that some protection has been built in for his members.

"Future manager's bonuses will be pensionable, and they can range from Â£2,500 to Â£6,000 a year," he said.

This will partly offset the effect of the new scheme, but not totally.

Savings

The reason for the Royal Mail's changes is obvious.

It has already promised to make extra payments for the next 17 years to offset the scheme's massive Â£6.5bn deficit.

That is adding an extra 10% to its pensionable paybill.

And that is on top of the current 20% rate for normal contributions.

Royal Mail says it simply cannot afford to keep on with this as it adds up to a current Â£850m a year.

But the combined effect of bringing in the career average scheme, plus raising the retirement age to 65, will knock about 9% off that total contribution rate.

That will bring it down to about 21%, and then to 11% once the deficit contributions stop.

The scheme will be "more affordable and sustainable" says the Royal Mail.

Inflation danger

Another big wrinkle in the new scheme is the fact that any member's accumulated pension pot will be uprated in line with inflation each year, but only to a maximum of 5%.

So, if inflation runs higher than that, the value of the accumulated pension will be undermined.

Not everyone will be worse off though.

The raising of the retirement age may encourage staff to work a few years longer, so not only may they rebuild their pensions they could continue earning while doing so.

Alternatively, any staff who decide to work part-time in the last few years of their employment may find that doing so affects their pension rather less than under a final salary scheme.

The consultation exercise has only just started.

But one official of the Royal Mail's main trade union, the CWU, told me the management should not assume it will sail through unquestioned.

"They have woken up the membership," he said.

"And on a subject that is dear to their hearts."

k979aaa · Post by **k979aaa** » 04 Dec 2007, 14:25

For why should we pay the price of mismanagement and goverment greed.! Now we all must bear in mind how royalmail took a pension holiday for over ten year's, If you took a payment holiday on your mortgage or creditcard you would have to pay it back plus interest!. Now to the greedy government's role in all this for ten year's the tory and labour government's took over Â£300 million pound's out of royalmail Â£3 billion pound's plus interest on top of that!. And when labour came to power it was they that caused this pension's crisis to escalate by introduceing new acounting procedure's on pension's!. NOW IF THIS GOVERNMENT CAN GIVE Â£30 BILLION POUND'S TO A FAILED BANK THAT THEY DO NOT OWN OR HAVE ANY OBLIGATION TO SUPPORT HOW CAN THEY DENY OUR RIGHT TO A LIFE AFTER WORK ON A FINAL SALARY PENSION!.

jafferpants · Post by **jafferpants** » 04 Dec 2007, 14:30

k979aaa wrote:For why should we pay the price of mismanagement and goverment greed.! Now we all must bear in mind how royalmail took a pension holiday for over ten year's, If you took a payment holiday on your mortgage or creditcard you would have to pay it back plus interest!. Now to the greedy government's role in all this for ten year's the tory and labour government's took over Â£300 million pound's out of royalmail Â£3 billion pound's plus interest on top of that!. And when labour came to power it was they that caused this pension's crisis to escalate by introduceing new acounting procedure's on pension's!. NOW IF THIS GOVERNMENT CAN GIVE Â£30 BILLION POUND'S TO A FAILED BANK THAT THEY DO NOT OWN OR HAVE ANY OBLIGATION TO SUPPORT HOW CAN THEY DENY OUR RIGHT TO A LIFE AFTER WORK ON A FINAL SALARY PENSION!.

Very easily as you will soon find out!!!!

terrace · Post by **terrace** » 04 Dec 2007, 16:45

WRITE A LETTER OF OBJECTION.
Don't forget every member should write a letter before the consultation period is over ,don't leave it until January 2008.In the letter write any explanation of why you object to a new Pension scheme.
The consultation must take notice of any objections, if possible get your union rep.to make a template letter so everybody's singing from the same hymn sheet.

wakkono · Post by **wakkono** » 04 Dec 2007, 17:32

how about someone putting an objection one on here which we could just copy and send to them via e mail

blackadder · Post by **blackadder** » 04 Dec 2007, 20:19

the labour party that we fund has shafted us good and true, and still the union will pay there dues to gordon brown. when will dave ward wake up and relise that this govenment has failed the nation and stop paying the tab until the govenment will listen to the people

Post by **dvbuk55** » 04 Dec 2007, 20:36

terrace wrote:WRITE A LETTER OF OBJECTION.
Don't forget every member should write a letter before the consultation period is over ,don't leave it until January 2008.In the letter write any explanation of why you object to a new Pension scheme.
The consultation must take notice of any objections, if possible get your union rep.to make a template letter so everybody's singing from the same hymn sheet.

Why aren't HQ doing that? Why aren't they objecting? Why no Vote No campaign? Because they've already agreed in principle to the fact the RM say they can't afford it. The wallies of wimbledon have caved in already.

tpost · Post by **tpost** » 04 Dec 2007, 20:39

we were solid thru out the strikes yet we are still being shafted on the pension issue. Look out other public sector workers cause gordon and his mates will come for your pensions after shafting us. vote labour ''my arse''

pickaname · Post by **pickaname** » 05 Dec 2007, 15:30

if they implement this then come out of it...i dont see any other option

jafferpants · Post by **jafferpants** » 05 Dec 2007, 15:38

dvbuk55 wrote:
terrace wrote:WRITE A LETTER OF OBJECTION.
Don't forget every member should write a letter before the consultation period is over ,don't leave it until January 2008.In the letter write any explanation of why you object to a new Pension scheme.
The consultation must take notice of any objections, if possible get your union rep.to make a template letter so everybody's singing from the same hymn sheet.
Why aren't HQ doing that? Why aren't they objecting? Why no Vote No campaign? Because they've already agreed in principle to the fact the RM say they can't afford it. The wallies of wimbledon have caved in already.

Iv'e been telling the site that since last july. when are folk going to wake up instead of believing all this consultation bollocks. THE FINAL SALARY SCHEME IS DEAD.

DirtyHarry · Post by **DirtyHarry** » 05 Dec 2007, 15:44

jafferpants wrote: THE FINAL SALARY SCHEME IS DEAD.

Not quite, mate. The final salary scheme will remain open to useless b'stards like Leighton and Crozier and the other top 100 knobheads in Royal Fail.

jafferpants · Post by **jafferpants** » 05 Dec 2007, 16:03

DirtyHarry wrote:
jafferpants wrote: THE FINAL SALARY SCHEME IS DEAD.
Not quite, mate. The final salary scheme will remain open to useless b'stards like Leighton and Crozier and the other top 100 knobheads in Royal Fail.

Yeah like they need it!!!!!

Post by **dvbuk55** » 05 Dec 2007, 18:01

Anyone had the softener from HQ yet about how wonderfully they performed by ring fencing the Â£1.6 billion already earned and how hard up RM are and couldn't possibly afford to sustain the pension fund for everyone - course nothings been agreed - the consultation is on going - so when is the ballet and when will we be getting the VOTE YES to screwing your pension off you?

TBH these guys must believe their own hype - WE GOT IT RINGFENCED? That money is protected by law.

You think that they'd put up a bit of a fight wouldn't you but no, true to form they go the PC route.

k979aaa · Post by **k979aaa** » 05 Dec 2007, 18:36

dvbuk55 wrote:Anyone had the softener from HQ yet about how wonderfully they performed by ring fencing the Â£1.6 billion already earned and how hard up RM are and couldn't possibly afford to sustain the pension fund for everyone - course nothings been agreed - the consultation is on going - so when is the ballet and when will we be getting the VOTE YES to screwing your pension off you?

TBH these guys must believe their own hype - WE GOT IT RINGFENCED? That money is protected by law.

You think that they'd put up a bit of a fight wouldn't you but no, true to form they go the PC route.

You must mean the letter from our union (C.W.U) that is concedeing all is lost and we must fall behind royalmail's masterplan. I FOR ONE WILL NOT AND WE SHOULD NOT AGREE TO SELLING OUR FUTURE'S ON THIS SHADY SHAM!.

strangler · Post by **strangler** » 06 Dec 2007, 16:07

dvbuk55 wrote:Anyone had the softener from HQ yet about how wonderfully they performed by ring fencing the Â£1.6 billion already earned and how hard up RM are and couldn't possibly afford to sustain the pension fund for everyone - course nothings been agreed - the consultation is on going - so when is the ballet and when will we be getting the VOTE YES to screwing your pension off you?

TBH these guys must believe their own hype - WE GOT IT RINGFENCED? That money is protected by law.

You think that they'd put up a bit of a fight wouldn't you but no, true to form they go the PC route.

Yeah got mine today. The lying bastards. What are they going to claim credit for next I wonder? It`s this sort of bullshit that makes me question whether I want to be a part of this union.