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CDC legislation update

28 Jun 2020, 19:02

According to www.parliament.uk, the report stage is due to start on Tuesday 30th June. It's the 4th of 12 stages before the pensions bill becomes law.

CDC legislation update

29 Jun 2020, 05:43

RobertT wrote:According to www.parliament.uk, the report stage is due to start on Tuesday 30th June. It's the 4th of 12 stages before the pensions bill becomes law.


Any idea of eventual timescale? A third the way through after two years doesn't bode well.

CDC legislation update

29 Jun 2020, 13:57

Just hoping it does not come in before Nov 1st, as if it does not I will get £750 for advice. personally I can't see it coming in till next financial year and the CW RM trustee told me, he can't see it coming in till at least next year.
"until the new cdc scheme is introduced" to me means I am probally safe for the £750 payment. Ie I plan to leave early Dec and I doubt it will be introduced before then.
Last edited by stephen500 on 29 Jun 2020, 16:55, edited 2 times in total.

CDC legislation update

29 Jun 2020, 14:04

The timeline so far:

Early 2018 – RM and CWU agree to introduce a CDC scheme as part of the 4 Pillars agreement.
During 2018 – Various meetings take place with the pensions industry and the pensions select committee.
Late 2018/early 2019 – CDC pension consultation takes place, the result being the government will introduce legislation. Queens Speech expected in May 2019.
Late 2019 – Queens Speech formerly announces plans to legislate, 6 months later than expected.
Early 2020 – Second Queens Speech(following general election) again announces plans to legislate.
Early 2020 – Legislative process begins.
March 2020 – Process is up to stage 3 of 12 and Coronavirus hits.

In my uneducated opinion, the legislation should be in place by the end of 2020 or beginning of 2021, assuming no more setbacks. With a RM CDC scheme being in place by April 2021 at the earliest.

CDC legislation update

29 Jun 2020, 14:57

I wonder what will happen to the current bonusplan and flexiplan contributions.

Would it stop completely or be transferred to a new stand alone AVC type plan ?

So many questions as we've already gone from final salary, Defined Benefit then Defined Contribution now this new scheme, I'm trying to keep up with it all.

CDC legislation update

29 Jun 2020, 16:58

NWpostie wrote:I wonder what will happen to the current bonusplan and flexiplan contributions.

Would it stop completely or be transferred to a new stand alone AVC type plan ?

So many questions as we've already gone from final salary, Defined Benefit then Defined Contribution now this new scheme, I'm trying to keep up with it all.

Good luck, I am glad I should be out of here by then.

CDC legislation update

29 Jun 2020, 23:29

All the major changes to pension entitlement from
1987- closing of Section B to new entrants and the introduction of Section C.
2008- closing of Section A, B and C to further accrual.
2010- moving of NRA 60 to NRA 65.
2014- removal of the link between actual pay and pensionable pay.
2018- closure of further accruals to the career average pension scheme.
Have one thing in common ...... they were all brought in at the start of April in that year. Probably because that is the start of the tax year and is easier for RM to deal with.
So if the CDC scheme doesn't come in next April then it more than likely wI'll not make an appearance until April 2022. This may still be an ambitious target date. I read an article a while back and in it was a survey of pension experts and advisors of which the majority didn't think CDC pensions would be widely available until 2024 and that the vast majority of employers would NOT be interested in changing over from their present DC pension schemes.

CDC legislation update

30 Jun 2020, 04:41

renrag40 wrote:All the major changes to pension entitlement from
1987- closing of Section B to new entrants and the introduction of Section C.
2008- closing of Section A, B and C to further accrual.
2010- moving of NRA 60 to NRA 65.
2014- removal of the link between actual pay and pensionable pay.
2018- closure of further accruals to the career average pension scheme.
Have one thing in common ...... they were all brought in at the start of April in that year. Probably because that is the start of the tax year and is easier for RM to deal with.
So if the CDC scheme doesn't come in next April then it more than likely wI'll not make an appearance until April 2022. This may still be an ambitious target date. I read an article a while back and in it was a survey of pension experts and advisors of which the majority didn't think CDC pensions would be widely available until 2024 and that the vast majority of employers would NOT be interested in changing over from their present DC pension schemes.

The RMPP pension year starts on 1st April which is why changes always happen on that date, although the change from section A to B for new entrants was actually on 1st December(1971)! It's also why our annual illustrations are dated 31st March.

I agree 1st April would probably be the best date to introduce CDC, but as it's going to be a completely separate scheme, does it have to be that date? In my opinion, no!

Then you have the theoretical scenario of the pensions bill getting royal assent on 2nd April. Are RM going to wait a whole year to introduce CDC?
Considering their stated aim of 'offering a CDC pension for over 140,000 employees as soon as possible'. Personally I don't think so!

I don't see the relevance of the tax year considering that runs from 6th-5th April!

RM are the only company actively planning on introducing a CDC pension scheme, as far as I'm aware. The legislation, is to some extent, being tailored to our scheme, and that's been mentioned during the consultation and legislative process.

Ultimately we'll just have to wait and see what happens.

CDC legislation update

30 Jun 2020, 18:04

I’ve got a feeling..... and it’s only a feeling that when the legislation is passed will be not that consequential to when the CDC pension starts. I think RM will want to row back on their contribution level and that is when the horse trading will start...... and horse trading takes time. The reasons why? Activist investor discontent over pension contributions , RMs balance sheet and the Covid 19 effect....... all reasons why they will want to pay as little into the pension scheme as they can get away with. Reducing their contributions is a “hidden” saving........ it will not cost anyone their job and the vast majority of postmen/women don’t think about their pension provision from the start of the year until the end of it. So in some respects it’s an easy target for RM to go for to bolster their finances..... if they reduce their contribution level from 13.6% to 10% they will save approximately £100,000,000 ..... which will go straight to the bottom line..... hey presto their balance sheet looks a lot better.
Time will tell.

CDC legislation update

30 Jun 2020, 19:20

The problem with reducing contribution levels into the CDC scheme is that will have an impact on the accrual rates and the whole scheme will have to be re-looked at root and branch. Having spent a long time planning it the way it is, personally I can't see that happening.

A more likely scenario to improve RM's balance sheet would be a reduction in the USO, which would have the effect of them trimming the workforce by more than they originally planned via the the already announced parcel strategy.

That would mean less wages, less employer NIC's, less pension contributions, less uniform, etc. I would suggest that would add up to a lot more than your £100 million.

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