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Joint statement between Royal Mail and CWU on pension consultation

Royal Mail and CWU have discussed the need for pension reform and key aspects of the company’s proposals now include the following elements:

The pensions proposal:

• Pensionable service before 1 April 2008 will continue to be calculated on the current final pensionable salary basis.  There will be no change to existing arrangements for past service.
• There will be a change in how the pension is calculated from a final salary to a career salary defined benefit arrangement from 1 April 2008.  Future service will be subject to an annual indexation by RPI (up to a maximum of 5% for each year) though the company has the discretion to raise this cap (in consultation with the trade unions)
• Normal retirement age to be increased to 65 with effect from 1 April 2010.  Existing scheme members will retain the right to take their pension from their 60th birthday onwards, though there would be actuarial reduction for pensions earned after 1 April 2010 if taken before reaching age 65.
• Existing members will be able to take the pension built up prior to April 2010 at age 60 or any time after that paid in line with current scheme rules. Pension built up after April 2010 will be paid on an actuarially reduced basis if taken before age 65 or unreduced if taken at 65. Colleagues may choose to take pension built up prior to April 2010 at age 60 and the remainder of their pension at age 65 thus avoiding any actuarial reduction.
• AVC arrangements will be available for those who wish to increase their contributions to mitigate the effect of the changes.
• The current scheme will close to new members from 31 January 2008.
• Eligible existing employees will be given a final opportunity to join the scheme prior to 31 January 2008.
• Existing employees under age 18 will, on reaching 18, be given one month to decide whether to join the scheme.
• A high quality defined contribution scheme will be put in place for new joiners after 31 January 2008.  The detail of the scheme including governance arrangements will be discussed with the union.  There will be a one-year waiting period before employees will be eligible to join the scheme.

The union supports these proposals  but during the consultation process, the union wishes to explore with the company alternatives to the closure of the scheme for new entrants and the terms of the new proposed DC scheme

The views of employees and members on this issue will be sought during the consultation in order to assist the union’s further discussions with the company.