Defined Benefit  

Progress is made on Royal Mail pension talks

Progress is made on Royal Mail pension talks

Royal Mail and the Communication Workers Union (CWU) have made "substantial progress" on the pension and pay talks, with an announcement expected tomorrow (12 January).

A spokesman for CWU's London division said, in a social media post yesterday (10 January), that the progress made during the talks "is now sufficient enough to start drafting the worlds of a potential agreement".

The union also revealed that a full update would be delivered on Friday by deputy general secretary Terry Pullinger, who has been leading the talks, which also include a discussion on pay and the working week, delivery times and changes to working culture.

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Earlier this year, the UK postal operator announced it would be closing the Royal Mail Pension Plan, its current defined benefit (DB) scheme, to future accruals from next year.

Following union opposition, the company was offering members the choice of joining either a DB cash balance scheme or a defined contribution scheme.

In October, the company won an injunction to block a two-day strike by its workers on the grounds that CWU - whose members voted in favour of industrial action - had not entered into a dispute resolution mechanism involving an external mediator, as required under a prior agreement.

Last month, CWU announced both parties were discussing the creation of a collective defined contribution (CDC) scheme to solve the current pensions dispute.

CDC schemes are also known as a form of "defined ambition" scheme and differ from defined benefit (DB) schemes, since they do not guarantee certain incomes in retirement.

Instead, CDC have a target or "ambition" amount they will pay out, based on a long term, mixed risk investment plan.

These schemes also differ from the traditional defined contribution (DC) plans, since they do not produce individual pension pots.

They invest savings in larger collective pots instead, which then provide an income to individuals during their retirement.

However, for Royal Mail to be able to create a CDC scheme, there will need to be legislation introduced in the UK.

The Pension Schemes Act 2015 created by the 2010 to 2015 coalition government defined "shared risk/defined ambition" or collective defined contribution as a distinct pension category.

However, secondary legislation under the act to bring them into effect have not yet been introduced.

CDC schemes are already being discussed in Parliament, since the Work & Pensions select committee launched a consultation on these plans last month.

Royal Mail union members will, however, have the last say about any agreement achieved by the way of an individual member vote, a spokesman for CWU said.