Royal Mail has launched a collective defined contribution (CDC) pension plan to provide its more than 100,000 employees with a cash lump sum and an income in retirement.
Along with the Communications Workers Union (CWU) and Unite CMA, the employer designed and implemented a pension arrangement for its workforce that was affordable for itself and its employees. Every employee with at least one year of service is eligible to join, with the majority joining automatically.
The plan pools members’ contributions and provides staff with both an automatic income for life in retirement and a cash lump sum. Employees pay 6% of their pensionable pay into the collective pot each payday, which is then topped up with an employer contribution of 13.6%.
Angela Gough, director of group pensions at 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 organisation. We have worked hard with our unions, the government, the Pensions Regulator, and the trustee of the collective plan to make it possible.”
Andy Furey, national officer at the CWU, added: “The CWU is pleased to see the introduction of the collective pension plan, which applies to all of our Royal Mail and Parcelforce members. We are confident the plan will provide a better outcome for our members. The twin attributes of an income for life and a guaranteed lump sum at retirement are important benefits for our members.”
Venetia Trayhurn, chair of trustees of the Royal Mail Collective Pension Plan, said: “I would like to thank all our advisers, service providers and the executive team for their support throughout the authorisation process. 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, added: “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. 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.”
