Royal Mail Pension Plan – Interview
The CDC launch has been delayed by the challenges facing the Pensions Bill. Guy Opperman pledged that the bill would be law by 2020, what does this mean for the Royal Mail’s plans for a CDC scheme? Of course, the Royal Mail Pension Trus- tee, whom I work for, will continue to manage the Royal Mail and DBCBS sec- tions however long it takes for the new CDC scheme to be launched. We know that Royal Mail wants the necessary legis- lation in place as soon as possible, so that it can launch its CDC scheme as soon as it is practical. At this point the company’s intention is that DBCBS should cease new accrual and the DC scheme [of which, ironically, I am a member myself] will largely be wound down and members will receive their future accrual via the CDC scheme. The old DB section will stay as it is in as- set terms, but the members who are still employed in the business will have their future pension accrual provided in the new scheme along with anybody else who joins the company.
Do you think other DB schemes might fol- low suit?
(DBCBS), which provides a lump sum up- on retirement for its members. Within the old DB scheme, members have an income at retirement and could “com- mute” up to 25% of the value of that pen- sion to a lump sum, which most members tend to do. The new DBCBS accrual pro- vides some [or possibly all] of this lump sum on retirement, which reduces the need for members to commute as much of their retirement income. The lump sum is guaranteed at the point of accrual,
and depending on the performance of the DBCBS assets, the level of this guarantee can be increased each year. Royal Mail also offered employees in the defined contribution scheme [the scheme for new joiners since 2008 and separate from Royal Mail Pension Plan] the option to transfer to DBCBS once they had com- pleted a qualifying service period. Once CDC is launched, the goal is that all em- ployees should be in a position to receive an equally attractive pension accrual.
There are not many left, and many are in the public sector. One can only speculate whether the government might take a view that as people are paying for council tax rises and watching their services fall because that money is going into a black hole in their pension funds, that they might take a look at it. Purely from a social and personal point of view, it would be wonder- ful if everybody in the country could join the benefits of a scheme like that. I should note that DC schemes can and do also provide a good pension, if you can get the contribution levels right. The sin- gle biggest factor is how much people put into their pensions each year, but, of course, there is reliance on how the in- vestments their scheme fare during their lives. I am optimistic that CDC has the potential to address some of those inter- generational injustices.
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