Royal Mail and CWU agree to adopt a Collective Defined Contribution (CDC) pension scheme

UUK and UCU should adopt something similar for USS

In the dispute between Royal Mail and the Communication Workers Union (CWU), both sides have agreed in principle to a mediator’s recommendation to adopt a collective defined contribution (CDC) pension scheme with a defined benefit element. CDC was authorised by primary legislation in 2015, but regulations to make it possible have not yet been enacted. Labour has come out in favour of such regulations, and the Tories will announce their position in the new year. Here is Royal Mail’s summary of the mediator’s main recommendations:

Royal Mail and the CWU should commit in principle to the future introduction of a Collective Defined Contribution (CDC) scheme with a Defined Benefit element.

To support the introduction of a CDC scheme for all, Royal Mail and the CWU should establish a Pensions Forum. The Forum will have responsibility for lobbying the Government to make the necessary legislative and regulatory changes so that a CDC scheme can be established, and for overseeing its governance.

In the meantime, members would be enrolled in the defined benefit cash balance scheme that Royal Mail had proposed earlier.

The following is from a video statement by Terry Pullinger, CWU Deputy General Secretary (Postal):

“[T]he employer has now accepted that we will develop one pension scheme for all of our members. That it will be a Wage in Retirement Scheme. That there will be an element of defined benefit guaranteed, and that there will be an element of shared risk. But it will be targeted to genuinely produce a pension in retirement for people. It will not be a scheme that simply cashes out the moment you retire. It will be a Wage in Retirement Scheme.”

What Pullinger refers to as a Wage in Retirement Scheme is not, however, the pure DB scheme with discretionary as well as promised benefits originally proposed by First Actuarial. Rather, as is implied by the following, the ‘shared risk’ element involves the mediator’s recommendation of CDC:

“…to have the scheme that we would like, the scheme that I’m describing to you, there has to be legislation introduced. It’s already law in this country. But the regulations for that legislation have not [yet] been drawn up. …We are now jointly connecting with people to try and ensure that we drive through that legislation as quickly as possible to enable our new scheme as we develop it and agree it. …that may go on for some time [so] we’re also dealing with transitional arrangements.”

As I explain here, something along the above lines of a CDC scheme with a DB element would be a significant improvement over UUK’s proposed move to 100% IDC for future accrual. It will be possible to realise such a combination by means of First Actuarial’s original WinRS proposal, which UUK and UCU could and should adopt for USS now.

Written by

Professor, Dept. of Philosophy, Logic & Scientific Method, LSE

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