The Collective Plan

The Royal Mail Collective Pension Plan is the future of pensions at Royal Mail and we’re excited to deliver its benefits to you on 7 October 2024.

As you may be aware, we have been working with our Trade Unions to develop a new way for Royal Mail colleagues to save for retirement. It’s called the Royal Mail Collective Pension Plan (the Collective Plan) and is the first of its kind in the UK.

We are delighted to announce that the Collective Plan is ready to launch on 7 October 2024. You can read our Joint Statement with the Communications Workers Union (CWU) and Unite CMA here.

The Collective Plan is a bit different. It pools its members’ contributions and provides everyone with both an income for life and a lump sum in retirement.

Why do we have a new pension and what are the benefits?

The CWU, Unite CMA and Royal Mail all wanted a pension plan that best served the long-term interests of both our people and the company. The key benefits of the Collective Plan are:

• An automatic income for life, in addition to a cash lump sum, making it easier for people to manage their money in retirement.
• When you pay 6% of your pensionable pay into the collective pot each payday, Royal Mail tops that up with a contribution of 13.6%*
• One plan for everyone – every employee with at least a year’s service is eligible to join.

How does it work?

An independent board of Trustees runs the Collective Plan. It is made up of independent professional pension trustees as well as individuals from Royal Mail, the CWU and Unite CMA. This board manages your pension separately from Royal Mail and looks after the money in the Collective Plan.

Each payday you pay 6% of your pensionable pay into the collective pot, and Royal Mail tops that up with a contribution of 13.6% *. The contributions are then pooled with money from other members and invested.

Each year you pay into the Collective Plan, you build up a cash lump sum equal to 3/80ths of your pensionable pay and an income for life worth 1/80th of your pensionable pay, if you take them at age 67:

• The income for life: The income for life will be adjusted each year, depending on how well the Plan’s investments are performing and how much the Plan expects to pay out to members. Your income for life can go down as well as up, before and after you start getting it, but the Plan aims to use investment returns to increase your income for life over the long term to help keep up with the cost of living. Learn more about the income for life.
• The cash lump sum: The guaranteed lump sum builds up yearly, separately from your income for life, and is paid as a one-off amount when you retire. Like your income for life, the aim is to use investment returns to increase your lump sum to help keep up with the cost of living. But, unlike your income for life, the lump sum you build up won’t go down – it’s guaranteed. Any increases to your lump sum, once granted, will also be guaranteed. Learn more about the cash lump sum.

Want to see what this looks like in action? Read our case study here.

What do I need to do?

You will receive a letter at your home addresses between 3 – 6 July, letting you know what the Collective Plan means for you, your options and any actions you might want to take.

For many of you who are eligible, you will automatically join the Collective Plan on the 7 October. Please check your letter to understand the process, what options are available and what actions you can take.

Where can I find out more?

Your pension is unique to you, so we strongly encourage you to take the time to read the letter you’ll receive.

We have also provided a suite of user-friendly resources in our Collective Plan microsite, including FAQs and a Pensions Helpdesk, to help you understand what this change means for you. Please do not hesitate to use any of the resources above.

*Most of this money is invested in the Collective Plan to pay for benefits and running costs. 0.3% of it pays the insurer that provides the ill-health benefits.

This update summarises your options and the benefits that Royal Mail’s pension arrangements offer, but does not give you any legal right to those benefits.  The benefits that Royal Mail pension arrangements offer are subject to the rules of those arrangements and those rules can change. Royal Mail has the right to change, suspend or withdraw any part of its pension arrangements at any time, including Pension Salary Exchange.