Royal Mail contemplates new union-backed pension plan proposal

14 Mar 2017, 17:02 ... oposal.php

Royal Mail is contemplating a new pension proposal from the Communication Workers Union; a new type of arrangement where some financial risks will be shared between workers and the employer.

Following the closure of a members’ consultation period on the defined benefit pension plan on Friday 10 March, Royal Mail is considering all feedback from employee unions.

Royal Mail revealed in January that it could no longer keep its defined benefit pension scheme that holds 90,000 employees, as it would become unaffordable after 2018. Instead, the formerly government-owned company plans to move members to a less-generous defined contribution scheme.

According to the Financial Times, while the new system would see the employer contributing but risk of investment transferred to the employee, the CWU has proposed a yearly evaluation of investment performance to decide whether a “core promise” is increased in line with inflation.

This suggestion would secure members with greater certainty over their pension income that they would in a regular DC arrangement.

CWU deputy general secretary Terry Pullinger told Pensions Age that the proposed plan is “DB in nature” and looks to share risk while focusing on “growth rather than derisking”. The proposed scheme would ensure employer stability when it comes to fixed contributions, Pullinger explained and said that when it comes to securing a pension pot, “someone has to do something for ordinary working people” and so set an example for other schemes.

Writing to members at the close of the consultation on Friday, Royal Mail said: “We know how important pension benefits are to our colleagues. We are sorry we had to write to Plan members in January 2017 to say we believe that the current Plan will soon not be affordable.

“In the absence of an affordable alternative, from April 2018, we have proposed that future benefits for Plan members would be built up on a Defined Contribution basis. This could be either in a new section of the Plan or in the Royal Mail Defined Contribution Plan (RMDCP).”

Royal Mail added yesterday, 13 March: "We are actively considering all the feedback and continue to engage with our unions.

“No decisions will be made until we have considered members’ views and have had an opportunity to discuss these with our unions. We will write to members once a decision has been made.

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