LTB 374/13 Pension Developments

Post by **Geezer** » 29 May 2013, 19:31

LTB 374/13 Pension Developments

No. 374/13

Date: 29th May 2013

To: All Branches with Postal Members

Dear Colleague

PENSION DEVELOPMENTS

Further to LTB 371/13, the following will update Branches and Representatives on the pension developments reported yesterday.

Given the overall significance of pensions, their recent history and the direct involvement of Government and the European Parliament, CWU members are entitled to be confused, disappointed and angry at this latest announcement by the Royal Mail Group and Post Office Limited.

The fact that this pension situation has developed at the same time as the company is being prepared for privatisation and despite the recent Government pension settlement, will raise huge question marks over its legitimacy and legality. It is inevitable this will become not just a serious industrial matter but also a major political issue. Whilst the Union has a responsibility to consider these pension proposals, we also believe that the question of affordability of future pension entitlements is directly linked to privatisation.

The Postal Executive will meet next week to consider both the proposals and their implications on privatisation. Further information will follow in due course. In the meantime, the priority for all CWU representatives is to convey the Union’s position to our members in the workplace. As such we have attached to this LTB an initial letter to members which should be copied by Branches and distributed immediately in the workplace. We have also attached a CWU Representatives’ Brief which explains the situation in more detail.

This latest pension development is another reason why our members must vote yes in the consultative ballot. For our members in Post Office Limited it will only strengthen our resolve in the current dispute.

Any enquiries on the content of this LTB should be addressed to the DGS (P) Dept.

Yours sincerely

Dave Ward
Deputy General Secretary (P)

==========================================================================================================================================================================================================

29th May 2013

Dear Colleague

Important Pension Developments

The Union has received formal proposals from both the Royal Mail Group and Post Office Limited to make further pension changes relating to the cost of funding accrued and future benefits within the remaining Royal Mail Pension Plan. This is separate from the Government Scheme.

The fact that this pension situation has developed at the same time as the company is being prepared for privatisation and despite the recent Government pension settlement, will raise huge question marks over its legitimacy and legality. It is inevitable this will become not just a serious industrial matter but also a major political issue.

The CWU has responded as follows:-

· The CWU has told the Royal Mail Group, Post Office Limited, the Trustee Board and Government, that any attempt to introduce further pension changes by executive action will be opposed by all means necessary.

· The CWU has raised questions over the legitimacy and legality of these proposals in light of the previous Government pension settlement and European State Aid.
We are seeking further advice from our lawyers and external pension experts.

· The Union will engage both companies and the Government directly on this matter.

Whilst the Union has a responsibility to consider these pension proposals, we also believe that the question of affordability of future pension entitlements is directly linked to privatisation.

This latest pension development is another reason why our members must vote yes in the consultative ballot. For our members in Post Office Limited it will only strengthen our resolve in the current dispute. We will write to members home addresses with more detailed information if and when the 60 day legal consultation process is triggered by either company.

Yours sincerely

Dave Ward
Deputy General Secretary (P)

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CWU REPRESENTATIVES’ BRIEF – PENSIONS

Introduction

· It was reported to the Liverpool Policy Forum and Annual Conference that both the Royal Mail Group and Post Office Limited had advised the Union that a further pension problem was looming.

· The Union has now received formal proposals from both companies to make further pension changes relating to the ongoing funding of accrued and future benefits within the Royal Mail Pension Plan.
This is separate from the Government Scheme.

· The purpose of this brief is to explain what we understand to be the company’s position, what the CWU is doing about it and the key messages we want our representatives to convey to our members in the workplace.

· In addition to this brief we have also attached a letter to be copied by Branches and handed to CWU members. It is essential that the distribution of this Communication is immediately prioritised.

What the Companies are saying about further Pension changes

· Both the Royal Mail Group and Post Office Limited initiated informal dialogue with the Union and explained that despite state aid clearance and the subsequent Government pension settlement,
the ongoing funding of accrued and future benefits within the Royal Mail Pension Plan has become a major issue for both companies and the Trustee Board.

· The Union has been told that the assumptions the Trustees are using to finalise the current scheme valuation will mean that Royal Mail’s contribution rate is likely to rise from 17.1% to around 30%.
Royal Mail state that this would cost an additional £300 million per year and that this will become unaffordable. Post Office Limited has set out the same position, albeit their numbers are proportionate to the smaller size of that company.

· Both companies say this problem is due to the performance of guilt yield investments being at an historic low and the assumptions being used by the Trustee Board to finalise the latest scheme valuation.
Both state this could not have been foreseen at the time of the Government settlement. Furthermore, if it had, the Government would still only have been allowed to deal with the historic pension deficit.
The company and the Trustee Board have both confirmed that the scheme is not in deficit at this stage.

What the Companies are proposing

· Both companies considered a number of ways to approach this but discarded options to close the scheme, increase members’ contributions, or introduce a further increase to retirement age.
Instead, they propose to cap future increases to the pensionable elements of pay to RPI (with a maximum of 5% per annum).

· What this means is the companies want to use the £2 billion of assets left in the plan following the Government settlement, to now offset their future contribution rate.
This money was originally set aside to pay for the final salary link that was maintained following the 2008 pension changes.

· The companies’ proposal offers some protection for those members in receipt of pensionable allowances still being linked to final salary.

· Royal Mail want to reach a legally binding agreement, which they say will offer protection for five years against any further pension changes in the event of privatisation.
At this stage Post Office Limited are not offering any further protection because of the Government’s role in subsiding the Post Office Network.

· As part of these proposals the company state they will make improvements for members within the defined contribution scheme.

What is the likely impact on members?

· For members of the Royal Mail Pension Plan, our initial assessment is that this change will have a detrimental impact if basic pensionable pay increases are higher than RPI inflation over a sustained period.
It will also impact on members who may be promoted in the last three years of their service. This is an initial assessment and the Union will need to undertake further work with our professional advisors
before we can quantify the full impact of this proposal on CWU members.

· For CWU members in the defined contribution scheme there is no detrimental impact and the company are proposing improvements to this scheme.

CWU Response – Key Messages for members

We want all representatives to convey the following key message to our members in the workplace.

· The CWU questions the legitimacy of these proposals in light of the recent Government pension settlement and the granting of European State Aid.
We will be seeking further advice from our lawyers and pension advisors as to the legality of the actions proposed.

· The CWU has told the Royal Mail Group, Post Office Limited, the Trustee Board and Government that any attempt to introduce further pension changes by executive action will be opposed by all means necessary.

· The CWU believe the question of affordability of future pensions is directly linked to the proposed privatisation of the company.

· The CWU has a responsibility to engage both companies on this matter and it has also been raised as a major issue in our ongoing discussions with Government.

· On the advice of our professional advisors the CWU will be further challenging the Trustee Board over the assumptions they are using for the valuation of the scheme and their investment strategy.
We will hold the Trustee Board to account by calling for them to organise an extraordinary meeting for scheme members at an appropriate point.

· In the event of either company triggering the 60 day legal consultation process, a further letter will be sent to members’ home addresses explaining the Unions position.

· This latest pension development is another reason why our members must vote yes in the consultative ballot.

· For our members in Post Office Limited it will only strengthen our resolve in the current dispute.