Pension Funds Insider

Pension Funds Insider brings the latest pensions news and industry insights; from investment and governance updates to new mandate appointments and pensions regulatory information.

Royal Mail pension scheme consultation ends

17 March 2017

Image for Royal Mail pension scheme consultation ends

A member consultation on the future of the Royal Mail pension scheme closed on 10 March, after a three-month consultation period.

The UK postal service provider, which announced at the beginning of this year that its Defined Benefit (DB) pension scheme would be unaffordable after 2018, says it is now considering all feedback.

A Royal Mail spokesperson said: "No decisions will be made until we have considered members' views and have had an opportunity to discuss these with our unions."

Royal Mail wants to replace its DB scheme with a Defined Contribution (DC) scheme, but the Communication Workers Union (CWU) has proposed an alternative that has greater risk sharing between the organisation and its employees.

The CWU, which represents Royal Mail's postmen and women, has previously threatened strike action about this issue, so the pressure is on for the organisation to negotiate.

Jon Hatchett, head of corporate consultation for Hymans Robertson said the CWU's proposals would go 'back to the future.'

"Back in the 1970s, DB pensions schemes had these types of pressure release valves, which successive layers of legislation has stripped away," he said.

"While member certainty over the pension promise has increased, the appetite of sponsors to offer these benefits has plummeted, due to the rising cost of provision."

Hatchett said although risk-sharing solutions like the one proposed by the CWU, are better for employees, they are likely to face resistance from employers.

"The other barrier to more risk sharing is that any arrangements that are not fully DC fall into the DB regulatory regime, which means a lot of extra compliance costs," he said.

"That means risk sharing is only a viable option for large, or very benevolent, employers."

The CWU's plan would encompass the 90,000 members of the Royal Mail's DB scheme, as well as some 40,000 people who pay into its DC scheme.

First published 17.03.2017