Is it a good offer? I need convincing.

[fishtank]

So were do we go from here. Strike and hope that RM pay double what they pay now into the current scheme. Is that sustainable?

It's nothing to do with how much Royal Mail are prepared to put in, I don't have a problem with the contribution level it's the framework of the CDC scheme that worries me. I don't think it's a sustainable pension model, I think it's a frightening concept because it doesn't fit the pension protection model.

In a normal pension framework you have one way or another a defined pension. In the case of a DB scheme as the name says you have a defined level of benefit.

With a DC scheme you have a pension pot that you can buy an annuity with and have a defined pension albeit smaller than a DB scheme.

With this new collective defined contribution scheme you have neither, you are completely as far as I can see at the mercy of the value of the scheme not only until pension age but until you die. if the scheme performs poorly your pension will suffer, if the scheme runs into trouble because there are not enough contributions coming in to cover pensions your entire pension in theory could be at risk.

In that scenario you would be relying on the employer to support the scheme but how far would that go? What would happen if you closed a CDC scheme? Can a CDC scheme go bust or would the level of pension payments just reduce and reduce until you were receiving pennies a month? How can the pension protection fund protect a pension that has no defined level and therefore really no defined value.

How anybody can think this is a good idea is beyond me. How a union can actively sell it to their members as a "wage in retirement" is frightening.

[Chitchat]

So were do we go from here. Strike and hope that RM pay double what they pay now into the current scheme. Is that sustainable?

It's nothing to do with how much Royal Mail are prepared to put in, I don't have a problem with the contribution level it's the framework of the CDC scheme that worries me. I don't think it's a sustainable pension model, I think it's a frightening concept because it doesn't fit the pension protection model.

In a normal pension framework you have one way or another a defined pension. In the case of a DB scheme as the name says you have a defined level of benefit.

With a DC scheme you have a pension pot that you can buy an annuity with and have a defined pension albeit smaller than a DB scheme.

With this new collective defined contribution scheme you have neither, you are completely as far as I can see at the mercy of the value of the scheme not only until pension age but until you die. if the scheme performs poorly your pension will suffer, if the scheme runs into trouble because there are not enough contributions coming in to cover pensions your entire pension in theory could be at risk.

In that scenario you would be relying on the employer to support the scheme but how far would that go? What would happen if you closed a CDC scheme? Can a CDC scheme go bust or would the level of pension payments just reduce and reduce until you were receiving pennies a month? How can the pension protection fund protect a pension that has no defined level and therefore really no defined value.

How anybody can think this is a good idea is beyond me. How a union can actively sell it to their members as a "wage in retirement" is frightening.

How has the union agreed to this? The. Pension solution just sounds unsuitable! We need a guaranteed wage in retirement and need that wage to be at a level which we can survive!

[TheTrolleyMan]

None of the major issues have been dealt with .....ie. Bullying & HARRASSMENT, fair workloads , morale , collapsing etc , an absolute crap deal , don't be bribed by a couple of hundred quid back pay now and sell your souls down the river !

[stephen500]

Some things I don't like, Sick absence being discussed after the agreement being one of them. Apart from that I think it is a good agreement for me. However RM must address the issues of finishing times for Postpersons on delivery. If flexibility can be achieved for those with families/carers and a system for not ruining every Sat for these posties, then that would be good. They must be addressed as delivery postpersons have the majority vote and if the CWU cannot address their concerns, then this agreement will not get a yes vote. I will be voting yes.

[hans solo]

Strike

[TheTrolleyMan]

Some things I don't like, Sick absence being discussed after the agreement being one of them. Apart from that I think it is a good agreement for me. However RM must address the issues of finishing times for Postpersons on delivery. If flexibility can be achieved for those with families/carers and a system for not ruining every Sat for these posties, then that would be good. They must be addressed as delivery postpersons have the majority vote and if the CWU cannot address their concerns, then this agreement will not get a yes vote. I will be voting yes.

I guarantee if you was on DELIVERY you wouldn't be so keen on voting for the deal of the century

[RTP]

So were do we go from here. Strike and hope that RM pay double what they pay now into the current scheme. Is that sustainable?

It's nothing to do with how much Royal Mail are prepared to put in, I don't have a problem with the contribution level it's the framework of the CDC scheme that worries me. I don't think it's a sustainable pension model, I think it's a frightening concept because it doesn't fit the pension protection model.

In a normal pension framework you have one way or another a defined pension. In the case of a DB scheme as the name says you have a defined level of benefit.

With a DC scheme you have a pension pot that you can buy an annuity with and have a defined pension albeit smaller than a DB scheme.

With this new collective defined contribution scheme you have neither, you are completely as far as I can see at the mercy of the value of the scheme not only until pension age but until you die. if the scheme performs poorly your pension will suffer, if the scheme runs into trouble because there are not enough contributions coming in to cover pensions your entire pension in theory could be at risk.

In that scenario you would be relying on the employer to support the scheme but how far would that go? What would happen if you closed a CDC scheme? Can a CDC scheme go bust or would the level of pension payments just reduce and reduce until you were receiving pennies a month? How can the pension protection fund protect a pension that has no defined level and therefore really no defined value.

How anybody can think this is a good idea is beyond me. How a union can actively sell it to their members as a "wage in retirement" is frightening.

Perhaps Robert T can help a little here. As far as I can tell your pension could in theory go up or down , but in theory if this ever where to happen it would only be by a very small percentage and only over a short period. Looks all very complicated.https://www.pensions-institute.org/IRRIChapter6.pdf" onclick="window.open(this.href);return false;

[RTP]

I found this bit quite interesting

Suppose 100 people join a new CDC scheme at the beginning of the year
and each member contributes one unit. Suppose they will retire at the end of the year and
will take their pension pot in full. Suppose the CDC scheme has a target return of 9.651% on
the investments in the fund. Suppose further that the investment fund used by the CDC
scheme generates a return that alternates between 5% one year and 15% the next year and
this pattern then repeats indefinitely.
Assume in the first year the investments happen to generate a return of 5% and so the
pension fund is worth 105 units, which is 4.651 units short of the target. In an equivalent
IDC scheme, the retirees will take out 105 units, since they have not been offered a target
pension. But in a CDC scheme, the retirees will get the target pension of 109.651 units. The
4.651 unit shortfall will come from the contributions of the next cohort of 100 members
who join the scheme on the same day that the previous cohort retires. However, the
scheme has a deficit of 4.651 units at the beginning of year 2, with assets of 95.349 units
and ‘liabilities’ (i.e., contributions) of 100 units from the second cohort
of members.


Suppose that in the second year, the investments generate a return of 15% and so the
pension fund is worth 109.651 (= 95.349 x 1.15) units. In the equivalent IDC scheme, the
pension fund is worth 115 (= 100 x 1.15) units and members will take
the full 115 units in pension. But in a CDC scheme, the members will take out the target pension of 109.651
units. The CDC pension fund is effectively fully funded at the beginning of year 3 when 100
new members join, with assets and ‘liabilities’ of 100
units (i.e., contributions of 100 units from the third cohort of members). The IDC scheme has an identical balance sheet on this
date.It should be clear that, given the repeating pattern of returns, the CDC scheme is fully
sustainable: it can continue to
pay the same pensions of 109.651 units to each new cohort
of 100 members indefinitely.

This contrasts with the IDC scheme which gives the ‘lucky’
cohort of members 115 units and the ‘unlucky’ cohort of members 105 units. However, the
average pension in the IDC scheme at 110 units is higher than the stable pension of 109.651
units in the CDC scheme. This is an inevitable consequence of smoothing: the smoothed
return of 9.651% in the CDC scheme is lower than the average return of 10% in the IDC
scheme. This might well be a price that members would be willing to pay, since in the real
world,they will not know before they retire whether they will be a member of a ‘lucky’ or
an ‘unlucky’ generation.
The volatility of the return in the IDC scheme (as measured by the standard deviation of the
return) is 5%, precisely the same as the standard deviation of the return on the
underlying investments. The standard deviation of the return in the CDC scheme is zero,
since in this stylised example each cohort gets the same pension.
The regularly repeating pattern of returns in this example is, of course, unrealistic. We can
make the returns more realistic by making them completely random. Suppose we assume
that there is a 50% chance of a 5% return each year and a 50%
chance of a 15% return. In this case, it will no longer be possible to design a CDC scheme in which the return is
constant over time at 9.651%. Instead the return will have to be set each year to ensure that
the funding ratio neither systematically increases nor systematically decreases. Suppose we
establish the rule that the return in the scheme will be set at 9.651% if the funding ratio 504
lies between 90% and 110% (these are typical limits in CDC schemes before adjustments to
the pension are made). Suppose, further, that if the scheme has a funding ratio above 110%,
then the return is increased by 1 percentage point to 10.651%. If, on the other hand, the
funding ratio is below 90%, then the return is set to equal the product of the funding ratio
and the target return (e.g., if the funding ratio is 80%, then the return will be set at 0.8 x
9.651% = 7.7208%). We again used the PensionMetrics model to generate twenty 50year
histories of returns. The average return in the CDC scheme was 9.3977%, while the average
standard deviation was 0.7619%. This compares with the IDC scheme in which the average
return is 10% and the standard deviation is 5%. The coefficient of variationin the IDC
scheme is 0.5 (i.e., 5%/10%), whereas the coefficient of variation in the C
DC scheme is just 0.08 (i.e., 0.7619%/9.3977%): the volatility per unit of return in the CDC scheme is just 16%
of that in the IDC scheme.
While the example here is very stylised, it is nevertheless useful for demonstrating that CDC
schemes can potentially generate more stable incomes across generations than IDC
schemes can. Further, we have precisely the relationship we would anticipate between the
two schemes: the CDC scheme with the lower risks has a lower average return, while the
IDC scheme with the higher risks has the higher average return.

[fishtank]

As far as I can tell your pension could in theory go up or down , but in theory if this ever where to happen it would only be by a very small percentage and only over a short period.

In theory it could if the risk sharing isn't managed properly go down to zero, in practice with the small number of examples we have in Europe the range seems to be from 2% all the way to 20% for some schemes in the Netherlands.

What that pretty bleak report also does is solely deal with investment return fluctuations, it does not deal with inherent flaws in the initial structure of the scheme. What we have is a huge demographic problem with setting up any new scheme.

If you picture a snapshot of the fund in 20 years time will the full-time members who've retired and are drawing a pension have been replaced by full-time staff making full-time contributions?

It's far more likely that the business will have far fewer staff and a far higher proportion of those will be part-time. Many funds are struggling not just because of investment returns but because as industries have modernised their workforce has shrunk dramatically and therefore so has their net pension contributors.

[RTP]

If you picture a snapshot of the fund in 20 years time will the full-time members who've retired and are drawing a pension have been replaced by full-time staff making full-time contributions?

It's far more likely that the business will have far fewer staff and a far higher proportion of those will be part-time. Many funds are struggling not just because of investment returns but because as industries have modernised their workforce has shrunk dramatically and therefore so has their net pension contributors.

Fair point, but that same point would apply in any pension scheme and that scenario needs to be factored in.

I'm not advocating the CDC scheme, I'm asking what is a better alternative.