Royal Mail to proceed with pay and collective DC pension scheme deal

Royal Mail

Postal organisation Royal Mail is to proceed with its new pay and pensions structure after approximately 110,000 employees, who are members of the Communication Workers Union (CWU) trade union, voted in favour of the agreement.

The deal, which was initially proposed in February 2018 after CWU members voted for industrial action in October 2017, includes a 5% pay increase for full-time employees, covering base pay, overtime and allowances. The pay increase will be backdated to October 2017 and maintained throughout 2018-2019. From April 2019, employees will receive a further 2% pay rise. Part-time staff will receive a 2.6% increase in their hourly rate of pay, awarded in October 2018 and October 2019.

In conjunction with the pay increases, a reduction in working hours has also been agreed. From October 2018, there will be a one-hour reduction to employees’ current 39-hour working week, and from October 2019 an additional hour will be removed from the working week. These reductions are subject to the completion of trials and the successful implementation of set initiatives. Royal Mail has committed to move towards a 35-hour working week by 2022.

Pension changes as part of the new deal include closing the Royal Mail Pension Plan (RMPP) to future accrual in its current form on 31 March 2018. This will then be replaced by a new collective defined contribution (DC) scheme, subject to the required legislative changes, which will run alongside a defined benefit (DB) cash balance scheme. Under these arrangements, Royal Mail will contribute 13.6% of a member’s pensionable pay.

Transitional pension arrangements will be implemented from 1 April 2018. This includes the introduction of a defined benefit cash balance scheme for RMPP members, with Royal Mail contributing 13.6% of pensionable pay towards members’ retirement lump sums, and a further 2% for all other member benefits, including death in service and ill health. RMPP members will continue to contribute 6% of their pensionable pay towards their retirement lump sums.

Members of Royal Mail’s defined contribution plan, who have a minimum of five years’ service, will also have the option to join the DB cash balance scheme. In addition, Royal Mail will increase its contributions to its DC scheme at each standard contribution tier by one percentage point, and all future and current DC pension scheme members in the standard section of the plan will be moved to the top tier of contributions to receive a 10% contribution from the organisation, and contribute 6% themselves.

The ongoing annual cash cost of pensions will continue to be approximately £400 million. The pension changes have been designed to provide a similar level of member benefit as the previous DB provision, while significantly reducing risk for the organisation.

The deal also includes operational changes.

A spokesperson at Royal Mail said: “Royal Mail is pleased that members of the Communication Workers Union (CWU) have voted overwhelmingly in favour of the agreement in principle on pensions, pay, a shorter working week, culture and operational changes.

“On 1 February 2018 [Royal Mail] announced that it had reached agreement in principle with the CWU. The union recommended that members vote in favour of the agreement during the ballot.”

Terry Pullinger, deputy general secretary, postal at CWU, added: “The massive vote in favour of the deal reflects the strong degree of membership support for the union’s ‘Four Pillars and Pay’ campaign, which has delivered real improvements to our members’ employment and retirement security.  The support has delivered a progressive agenda which confronts the challenges of our time and significantly improves our members’ pay, working hours and workplace culture, both for current and the future generation of postal [employees]. The agreement also extends the legally binding protections which gives postal [employees] confidence that the Royal Mail Group will not be broken up and that protecting the six-day Universal Service Obligation (USO) remains a priority.

“Now the agreement is signed, the hard work begins on ensuring this comprehensive, long-term deal is implemented in full across Royal Mail Group. The CWU hope the degree of support shown by our members, both in the industrial action ballot and in favour of the deal, reflects the union’s determination to deliver all elements of the agreement and provide our members with employment, standard of living and retirement security.

“The union is committed to work with Royal Mail to improve industrial relations, deliver better services and products for customers and safeguard the six-day Universal Service Obligation (USO) to secure the future of this great British institution.”