CWU reports strong Royal Mail employer commitment to CDC…

…and all party agreement to issue the required regulations

Update: Click here for the agreement between Royal Mail and the CWU regarding CDC that was announced on 1 February 2018. Click here and see section 11, pp. 9–11, for further details.

In early December the Communications Union (CWU) and Royal Mail accepted a mediator’s recommendation to “commit in principle to the future introduction of a Collective Defined Contribution (CDC) scheme with a Defined Benefit element.”

Yesterday, the CWU issued substantial updates on the progress of negotiations with Royal Mail. Here are the more newsworthy items:

Strong employer commitment to CDC: Terry Pullinger, CWU’s Deputy General Secretary Postal, said that “it’s now absolutely accepted that we’re going to be developing a Wage in Retirement Scheme [WinRS] for all of our members. Now that is massive stuff, it’s crucial we’ve been absolutely convinced in the last six days that management are absolutely serious about doing that. … I cannot question that there is serious intent on the employer’s side to push for this legislation [to make CDC possible], which implies they are very serious about having this new pension scheme.” Pullinger also announced that CWU and Royal Mail are drafting a joint letter to the Minister at DWP calling for the urgent drafting of regulations that will make it possible for them to introduce CDC.

All party commitment to CDC regulations: Pullinger said that “Legislation has already been cleared by all the parties to enable us to have the collective defined contribution (DC) element of our new type of scheme.”

The level of the CDC target pensions and therefore of the employer contribution is the main sticking point in the negotiations. According to Pullinger, “What we haven’t agreed yet, is what the target will be for the outcomes of that scheme. We’re saying it can’t be anything less than any of the schemes we’ve got now, so it’s really got to match the best in terms of targeting and then that influences what the employer has to pay into that pension scheme.” I interpret CWU to be calling for a level of employer contribution sufficient to fund target pensions that are as good as the level of the promise of the best DB pensions now on offer.

CWU refers to the “Defined Benefit element” of the agreement as “a DB lump sum element”. I infer from this that the DB element will consist of Royal Mail’s earlier cash balance proposal. This is a departure from First Actuarial’s original WinRS proposal, which was entirely a DB scheme, but with discretionary increases in DB accrual and pensions in payment built on top of the statutory minimum DB promise. By contrast, the cash balance DB element under the current proposal will be a promised minimum level of cash in one’s pension pot at retirement to serve as one’s tax free lump sum. CDC would deliver pension income during retirement.

What follows is my transcription of the subtitles that CWU provided of a video update by Pullinger on the pensions negotiations. The subtitles include what I take to be some small substantive amendments to Pullinger’s spoken words, including, for example, a deletion of his reference to ‘defined ambition’ as a gloss on ‘collective DC’, perhaps to make clear that the scheme is a hybrid of pure CDC and DB cash balance rather than First Actuarial’s original WinRS proposal. Here’s the transcript of the video:

“In respect of pensions, as we reported last time, it’s now absolutely accepted that we’re going to be developing a Wage in Retirement Scheme for all of our members. Now that is massive stuff, it’s crucial we’ve been absolutely convinced in the last six days that management are absolutely serious about doing that.

What we haven’t agreed yet, is what the target will be for the outcomes of that scheme. We’re saying it can’t be anything less than any of the schemes we’ve got now, so it’s really got to match the best in terms of targeting and then that influences what the employer has to pay into that pension scheme. So there’s a gap at the moment, with what they’re saying they’re prepared to pay and what we believe they should pay, to enable that scheme to be acceptable to everybody and those negotiations are continuing.

Also, in order for us to have that scheme, there need to be regulations introduced. Legislation has already been cleared by all the parties to enable us to have the collective defined contribution (DC) element of our new type of scheme. Now, we said we would campaign together, us and the management, that was part of the commitment in the previous week’s talks and this week there’s been significant activity on that. We’ve jointly attended a meeting at the TUC of a group called the Friends of CDC, who have been trying to promote the implementation of that regulation for the last two years. They were delighted to have us there. Also involved in that meeting was the Department for Work and Pensions and we made it absolutely clear that we need a solution, even if it’s in the interim, we need a solution for Royal Mail Group, because it could be the difference between us being able to resolve this dispute or not. So politicians will have to be aware, we’re talking about the pensions of 140,000 people and we’re also talking about the potential of a national postal strike if we cannot find a resolution to this particular subject. What I can’t question is that Royal Mail was full-on in that meeting in making the point that we need that legislation because we both want this new scheme and that’s a massive shift from where the employer has been. We’re also drafting a joint letter which will go to the Minister at the DWP. We’re also contacting and we’re going to jointly meet all the members of the Select Committee led by Frank Field MP, I cannot question that there is serious intent on the employer’s side to push for this legislation, which implies they are very serious about having this new pension scheme. We have to continue to talk about how much they pay into it and what the outcomes are, because that will be crucial to us getting a final agreement on the actual scheme.”

Shortly after they posted the video, CWU also issued the following written ‘Summary of Talks with Royal Mail Group’:

“In respect of pensions and as previously reported, a Wage in Retirement Scheme, with a DB lump sum element is now being worked up. What is not yet agreed are the targeted outcomes and RMG’s overall contribution but these are being worked through in a more positive manner. You will also recall that both parties were committed to joint lobbying activities to push through the regulations required for our scheme to be introduced. To this end, in the last week, we have jointly attended a Friends of Collective Defined Contributions Meeting at the TUC to promote our case for a new Defined Ambition Scheme and discuss required lobbying activities. The CDC Group (which includes Representatives from the TUC, First Actuarial, Senior Civil Servants from the DWP, business groups, pension stakeholders and other interested parties) has been campaigning for a number of years for the same regulations to be introduced that we require for our proposed Royal Mail Group Scheme. In addition, both parties have agreed a series of information sharing and joint lobbying activity targeting key politicians and Government Departments.”

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