We have committed in principle to provide a Collective Defined Contribution (CDC) scheme1, with a Defined Benefit Lump Sum Scheme (DBLSS)2 sitting alongside it. Together they would target, but not guarantee, a similar level of benefits to those currently provided by the Royal Mail Pension Plan (RMPP).
The CDC scheme is subject to legislative and regulatory changes being made. We have been working closely with the CWU to call for the introduction of the UK's first CDC pension scheme. Following a consultation into CDC schemes, which was launched in November 2018, the Government announced in March 2019 that it plans to introduce the legislation to enable CDC schemes at the earliest opportunity. We welcome this news as it bring us one step closer to introducing a CDC scheme for Royal Mail colleagues. The next step is likely to be in the Queen's Speech, where the Government formally announces what bills it intends to bring forward.
Whilst we seek a CDC scheme, from 1 April 2018 members are building up retirement benefits under our transitional arrangements. They will continue to provide good quality retirement benefits for RMPP and Royal Mail Defined Contribution Plan (RMDCP) members.
What this means for you
We sent a letter and booklet to members’ home addresses in February 2018, to help them understand what our agreement in principle could mean for their retirement benefits. You can also access this information at the links below.
Royal Mail Pension Plan members
Royal Mail Defined Contribution Plan members
Questions
If you have questions on our pension arrangements, please have a look at the Q&A here. You can also call the Pensions Helpline on 0114 241 4545. Lines are open Monday-Friday, 8.30am-5.00pm, not including bank holidays or email pensions.helpline@royalmail.com.
Our pension arrangements
Royal Mail Group has in place the following key pension and life assurance arrangements for its employees.
The Royal Mail Defined Contribution Plan is open to eligible new employees of Royal Mail Group and those eligible employees who are not members of any other Royal Mail Group pension arrangement.
The Royal Mail Pension Plan closed to new entrants with effect from 1 April 2008 (except for some employees who worked for the company and were under age 18 on 31 March 2008).
The Royal Mail Group Life Assurance Scheme provides death in service cover for employees who are not members of a Royal Mail Group pension arrangement.
1 Collective Defined Contribution (CDC) schemes have fixed contribution rates from the employer and members, but pool investment and longevity risk between members. There is a target for what the employee will receive in retirement but this target is not guaranteed. The actual benefit payable will depend on factors such as the scheme’s investment performance and members’ collective longevity experience. There is no need for scheme members to buy an annuity on retirement, as the scheme pays the pension. But that pension, and any future increases to that pension, are not guaranteed, and will depend on factors such as the scheme’s investment performance and members’ collective longevity experience. The combination of these features makes for a more efficient design for members when compared with a pure Defined Contribution scheme, but with no benefit guarantees to be underwritten by the employer. The CDC scheme requires certain legislative and regulatory changes to be made before it can be established.
2 Note: we have previously referred to the “DBLSS” as a “Defined Benefit Cash Balance Scheme” (DBCBS). It has been renamed as the DBLSS to distinguish the CDC arrangements from the transitional DBCBS. The scheme, and the way that it would work, has not changed.