Watershed moment

The Government has published its response to the consultation on Collective Defined Contribution (CDC) pension schemes. It has committed to bringing forward legislation to enable CDC pension schemes at the earliest opportunity. 

We welcome this response. It brings us one step closer to introducing a CDC pension for Royal Mail employees as soon as possible. 

This consultation follows an agreement reached between Royal Mail and the CWU in February 2018 to pursue a CDC pension. We both agreed that a CDC pension would meet our mutual objectives of providing sustainable, affordable and secure future retirement arrangements for all employees.

We believe that the CDC scheme is a fair proposal that compares favourably with the retirement benefits offered in our industry and by other large UK employers. 

With a CDC pension, employer and member contributions into the pension scheme are pooled, and this collective pot is then invested. CDC pension plans pay members an income in retirement, rather than members having to buy an insurance product (known as an annuity) or investing their money in another way. While there is an expected level of benefit that the employee will receive in retirement, this is not guaranteed.

Jon Millidge, chief risk and governance officer, said: ‘This is very welcome progress. Royal Mail and CWU have been campaigning together to bring about this legislation, building a cross-party alliance of supporters in both Houses of Parliament as well as working with Government. We now look ahead to the next stage, and ultimately, delivering the UK’s first CDC pension.’

Terry Pullinger, deputy general secretary (Postal) at CWU, said: ‘The pensions industry desperately needs innovation if we are to enable people to retire with dignity and security. An occupational wage in retirement scheme design running alongside one’s state pension has proven to enable those objectives.

‘DB is the gold standard of that design and should be maintained wherever possible, however where it cannot, there have to be more options than simply DC schemes. The CWU is proud, along with Royal Mail, of being at the forefront of such innovation and will be delighted to prove that CDC options will prove to be a watershed moment in pension provision and benefit working people way beyond our own membership.’

What happens next?

The next step is likely to be in the Queen’s Speech, where the Government formally announces what bills it intends to bring forward.

We will update colleagues on progress as we move towards implementation and write to you with more scheme details in due course.