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LTB 589/19 : New Wage in Retirement Pension Scheme for all our Royal Mail Group Members : Queen's Speech

15 Oct 2019, 16:34

https://www.cwu.org/ltb/ltb-589-19-new- ... ns-speech/

No. 589/19

14th October 2019

Dear Colleague,

New Wage in Retirement Pension Scheme for all our Royal Mail Group Members – Queen’s Speech

Further to LTB 165/19 issued on 18th March 2019. I am pleased to report that the Pensions Schemes Bill was announced as part of the Queen’s Speech earlier today.

This Bill will pave the way for the introduction of our historic DB/CDC (Collective Defined Contribution) scheme for all Royal Mail Group members. This wage in retirement scheme formed an integral part of the Four Pillars/Guiding Principles Agreement.

When our scheme is introduced it will be the first of its kind in the United Kingdom and will herald a historic moment for this Union. Furthermore the new innovative pension arrangements will ensure that present and future generations of postal workers will have both dignity and security in their retirement.

It is also worth remembering that this milestone would not have been achieved without the support of our members and a strong CWU presence in the workplace. Please find attached to this LTB the Press Release that the Union has circulated today which highlights our thanks to those that have ensured we have reached this stage.

It should be noted that this is only the first part of the Bill’s journey to become legislation but it is still a huge moment for this Union and its loyal membership. Branches and Representatives will be updated on further developments as and when they occur.

Any enquiries in relation to the content of this LTB should be addressed to the DGS(P) Department.

Yours sincerely,

Terry Pullinger
Deputy General Secretary Postal

http://www.cwu.org/wp-content/uploads/2 ... Speech.pdf

http://www.cwu.org/wp-content/uploads/2 ... .10.19.pdf

LTB 589/19 : New Wage in Retirement Pension Scheme for all our Royal Mail Group Members : Queen's Speech

18 Oct 2019, 02:34

Is this CDC scheme all it’s cracked up to be? How does it give security in retirement when pension income can be reduced in bad years? How much can it be reduced by in any one year? To prevent this situation arising a financial buffer would have to be built up by the scheme. Who is going to guarantee the buffer until one is built up? The big selling point of CDC to RM is they are not liable for any shortfall. So call me an old cynic, i cannot see them being too enthusiastic in proving that guarantee. Have I missed something here? At least with the interim scheme you are guaranteed to get 19.6% of your pensionable pay that is paid in each year. I know it is only to provide a lump sum. I get that. But the important word there is guaranteed...... the one vital word that is missing with CDC........ if you want security in retirement.

LTB 589/19 : New Wage in Retirement Pension Scheme for all our Royal Mail Group Members : Queen's Speech

18 Oct 2019, 06:50

You may find this article interesting on the subject of buffers.

And the Anticipated design of a RM CDC scheme can be found here, which tells you the mechanism for increases and decreases.

LTB 589/19 : New Wage in Retirement Pension Scheme for all our Royal Mail Group Members : Queen's Speech

18 Oct 2019, 13:17

Very helpful Rob thank you.
Having read both links I am less enthusiastic than I was before. 100% of contribution will be put in Return Seeking Assets until you reach your nra of 67. Given the points below:
Firstly, stock markets have been in the longest continual bull market in a long, long time.
Secondly, US treasuries are in an inverted yield curve. Every time this has happened in the last 100 years the US has gone into recession within 18 months.
Thirdly, there is an 19 trillion dollar bond bubble in the US, which at some point will have to have the air taken out of it or it will burst.
Fourthly, a lot of government treasuries around the world are in negative yield territory. Germany, Japan etc.
Fifthly, US banks are in a more leveraged position than they were in 2008. European banks are in a very fragile position, look at Germanys biggest bank.
What happens when the next crash takes place? 3 years of continual reduction in pensions?
How much security of income will there be with this CDC scheme given that no buffer will be built up, all problems will be dealt with at the time?
Plus the contribution level is going down from 19.6% to 15.2%, if you are luck enough to be in section B or C. It’s even marginally reducing for members in the DC scheme from a top of 16% down to 15.2%.
What people want in retirement is security I don’t see how this scheme gives people that. This will not effect me too much as I’m not far off the promised land of retirement...... but people in there 20s and 30s I wish them the best of luck.
All things taken into account I would rather stay with the interim arrangements at least you have a guarantee with that.... assuming RM doesn’t go bust of course! :crazy: :pray :roll:

LTB 589/19 : New Wage in Retirement Pension Scheme for all our Royal Mail Group Members : Queen's Speech

18 Oct 2019, 13:52

All valid points, but obviously any stock market investment of this nature is for the long term and when markets drop, you buy at a reduced rate. When they recover you're quids in, and I know that from personal experience. :Very Happy
So just because our pensions can go down doesn't mean they won't go up again!

The contribution levels quoted relate to what's going into the CDC scheme, the rest is going into the Defined Benefit Lump Sum Scheme which will provide a guaranteed lump sum in a similar way to the DBCBS. Making a total of 19.6%.

I would agree that people want security but a normal DB scheme is not an option for RM due to them not wanting to be responsible for any future shortfalls. So the only other option is individual DC.
At least CDC aims to provide an income for life rather than just a pot of money. And that's a pot of money that a lot of people will either spend very quickly or buy an annuity paying a pittance.

It's horses for courses and I'm not too off retirement either. But personally I think CDC is going to be better for those in their 20's and 30's compared to the DC alternative. But as posties are going to be the guinea pigs, only time will tell.

LTB 589/19 : New Wage in Retirement Pension Scheme for all our Royal Mail Group Members : Queen's Speech

18 Oct 2019, 17:16

All true Rob.
The main thing with stock market investing is time....... time in the market to grow and compound dividends...... so from that point of view anyone in their 20s and 30s may benefit.
Warren Buffett has said on many occasions that the average Joe should put their money in low fee indices trackers and leave it there for 20 or 30 years. All the interviews I’ve seen of the man he has always given good advice and that is some of the best. His reason being the extra fees you pay for actively managed funds eats away at the gains and he has only known a handful of stock pickers in his time that can out perform the market over a good length of time.
Just as an aside. I worked out recently how much I would have got at 55 if the the DB was still in place and compared what I would get now after all the changes. Just over 63k lump sum and just under 800 per month pension. After all the changes, just over 45k lump sum and just under 550 per month pension. Just shows how since 2008 the pension has been chipped away. Effectively devalued by a quarter.

LTB 589/19 : New Wage in Retirement Pension Scheme for all our Royal Mail Group Members : Queen's Speech

18 Oct 2019, 22:35

Correction. The figures in my last post were assuming taking everything at 60.

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