Zarah ChoudharyRoyal Mail has launched the UK’s first collective defined contribution (CDC) pension plan, ‘the Royal Mail Collective Pension Plan’ or ‘the Collective Plan’.
The scheme will offer more than 100,000 Royal Mail employees a cash lump sum and an income in retirement.
Royal Mail, the Communications Workers Union and Unite Communication Managers Association (CMA) designed the scheme.
At the outset, the parties agreed that the scheme had to provide one pension for all employees with at least 12 months service.
It also had to be affordable for Royal Mail and its people, and provide an income in retirement.
The Collective Plan pools members’ contributions and provides everyone with both an income in retirement and a lump sum.
Employees pay 6% of pensionable pay into the collective pot each payday, as Royal Mail tops that up with a contribution of 13.6%.
The majority of Royal Mail employees will join the Collective Plan automatically.
Angela Gough, director of group pensions at the Royal Mail, said: “The Collective Plan is the future of pensions at Royal Mail and we believe it is the right scheme for our people and our company.
“Today heralds an exciting development for Royal Mail and for the pensions industry.
“We have worked hard with our unions, the Government, the Pensions Regulator, and the Trustee of the Collective Plan to make it possible and we are delighted to have reached this point.”
Andy Furey, national officer, CWU said: “The CWU is pleased to see the introduction of the UK’s first Collective Pension Plan which heralds a new pensions era and applies to all of our Royal Mail and Parcelforce members once they have a year’s service.
“We are confident the innovative benefits within the Collective Plan will provide a better outcome for our members than a traditional Defined Contribution scheme.
“The twin attributes of an income for life and a guaranteed lump sum at retirement are important benefits for our members.”
Gary Sassoon-Hales, chair of the Unite CMA FTR committee, said: “We are proud to have played a key role in the creation of the Royal Mail Collective Pension Plan, a pioneering scheme that breaks the mould of existing UK pension schemes and shows that there is indeed another way.
“It exemplifies the power of collaboration between unions, Royal Mail, and other stakeholders, reflecting our commitment to safeguarding the financial well-being of our members while ensuring the long-term viability of the company.”
Venetia Trayhurn, chair of trustees of the Royal Mail Collective Pension Plan, said: “With over 100,000 members at launch, the Collective Plan will immediately become one of the biggest single-employer, private-sector schemes in the UK.
“As chair of the corporate trustee that will oversee the new scheme, I would like to thank all our advisers, service providers and the executive team for their support throughout the authorisation process, and in preparing for this moment.
“The Trustee Directors are looking forward to putting this new model into action and delivering for our members.”
Paul Waters, head of DC at Hymans Robertson, said: “The launch of the Royal Mail CDC scheme is a highly significant milestone for the pensions industry.
“Delivering a brand-new type of pension scheme has taken a sustained effort from everyone involved, innovation on this scale is hard.
“CDC provides great value by delivering higher pensions for lots of savers alongside increased certainty their pension won’t run out in retirement, which is desperately needed.
“While celebrating today’s achievement, however, it’s important to recognise that the launch of the Royal Mail CDC scheme is just the beginning.
“The Royal Mail’s scheme was designed around specific objectives and the way it’s been set up will not be the best path for all schemes thinking about CDC.
“Other employers will have their own individual objectives and profile of members, which means a range of different types of design will be needed to cater appropriately for different groups.
“As an industry we need to develop a broad range of DC risk sharing options to deliver the greatest benefit to future members.”
