Page 2 - Royal Mail Case Study
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                 The solution
CDC – Delivering member benefits without putting Royal Mail at risk
Following the threat of industrial action over broader terms and conditions, Royal Mail and CWU found themselves in mediation.
From the challenging pension discussions there emerged a plan for a new type of scheme, a Collective Defined Contribution (CDC) wage in retirement with a DB lump sum.
With CDC, contributions are defined, but they are pooled collectively rather
A new chapter in industrial relations at Royal Mail
than being assigned to individual accounts. This arrangement gives members more reliable benefits
than DC, and takes the burden of investment decision-making out
of their hands. And the investment efficiencies that a collective scheme brings can result in better benefits or lower contributions.
The Scheme offers a career-average pension, which is similar to DB except
A groundbreaking approach outcome to pensions provision
that the CDC wage in retirement pension can go down as well as
up. “First Actuarial produced a convincing pension scheme model. We asked them to project a mail worker’s wage back over 25 years to test it out, and it worked,” says Terry. The CDC wage in retirement and DB lump sum produces an income that members can rely on.
“I can’t speak highly enough about First Actuarial – their people have been brilliant. The journey has been inspirational, nothing but a positive experience. The way they present their findings so a layperson or negotiator can work with them is first class. They’re not up themselves, and nothing seems to faze them. They’re not just fantastic at the calculations and modelling work – they passionately believe in the need for something new in pensions. I genuinely believe that they care about working people and their pensions.”
Terry Pullinger, Deputy General Secretary (Postal), CWU
 Having agreed that CDC offered both the Employer and workforce the best outcomes, Royal Mail and CWU proceeded to lobby jointly for legislation to facilitate CDC. Their unity marks a new chapter in industrial relations at Royal Mail.
“First Actuarial stood shoulder to shoulder with us, and together with Royal Mail we’ve helped make CDC
happen,” says Terry. “We’ve got the support of the Minister for Pensions, who’s pushing it with everything
he’s got, and we’re working with the Department of Work and Pensions to pass the legislation needed. We had plenty of opponents and naysayers at the start, but they’ve all fallen away now and CDC has cross-party support.”
Happy CWU membership – with the promise of equality of provision and a wage for life
Providing a wage in retirement has been a cornerstone in negotiations. Rather than rely on a savings account, which is what DC is, Royal Mail workers will be able to retire without worrying that their money might run out before they die.
“The CDC wage in retirement and DB lump sum have been incredibly well
received by the CWU membership, which voted 90% in favour,” says Terry. “We tell them that we’re making history – CDC will be the first of its kind in this country, and they’re quite proud. With a wage in retirement, and a Defined Benefit lump sum, CDC
will give people far more chance of dignity in their old age than DC.”
Cost efficiencies for Royal Mail
For Royal Mail, the CDC wage in retirement is clearly a positive outcome too. They have fixed their pension contributions at the current level, and
the cost efficiencies mean that they can offer a more attractive pension than they could ever have hoped for with an individual DC scheme.
 Regulated in the UK by the Institute and Faculty of Actuaries in respect of a range of investment business activities. First Actuarial LLP is a limited liability partnership registered in England & Wales. Number OC348086.
Registered address: First Actuarial LLP, Mayesbrook House, Lawnswood Business Park, Leeds, LS16 6QY.

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