Maybe it’s because they’ve been reading the FCA’s report on Retirement Outcomes. Maybe the FCA have been talking with them. Either way, the 140,000 postal workers in the Royal Mail scheme don’t want a pension when they pack up their postbags, they want a pension.
Or as they eloquently put it, they want a “retirement wage”.
Yesterday I asked the Pension Regulator’s panel if they really stood for pensions or whether they championed retirement saving or financial wellness in later life or just “pension freedom”. I got a robust and very feisty answer from Nicola Parish. She was old school, she stood up for pensions.
In which case, I rather hope that she will be rooting for the CWU and their members in their conversation with Royal Mail and get behind its proposals, handily laid out here by my colleague, Hilary Salt of First Actuarial.
Is it so unreasonable that the postal workers should want to receive more pension for each year they work with the Post Office. That was and is the deal they sign up to. There is nothing in postmen’s contracts about “drawing down investments”, “buying annuities” or “cashing out”. The promise is for a wage in retirement commensurate with the time worked and the amount earned.
Are you watching FCA?
In case you hadn’t noticed, the FCA have been digging at the pensions industry for not coming up with innovative solutions. They may feel miffed that the CWU solution does not involve robots, dashboards or digital tools. They may feel sorry that the CWU is reinvigorating an old idea, using pension language to explain matters and adopting an investment strategy which is very simple.
This innovative approach is as close as a defined benefit scheme can get to being a defined contribution. It could only get closer if it was a CDC scheme, which it would have been had the Government not abandoned the secondary legislation for such arrangements a few months after enacting the primary rules.
The only reason that this proposal is not more innovative is because the Government has slammed the door in the face of the innovation that would have allayed the fears of Royal Mail and their uber-cautious actuarial advisers.
But it is quite innovative enough. The proposal has been stress-tested and it survived the punishment it was put through. The assets are designed to meet the liabilities and not the other way round. The liabilities can be flexed so that the contribution rate remains steady (in line with the current funding rate from the Royal Mail).
FCA, you should read, understand and wonder that such innovation can exist in such parched a landscape. You could help – so could the DWP and tPR and the accounting standards board. We should not be valuing the liabilities of such a proposal against a corporate bond discount rate (for FRS102 purposes). We should not be requiring the pension to be guaranteed. We should allow members to have property rights even when the pension is in payment.
These are the very things that would have been allowed had we had CDC rules in place, instead of them gathering dust in a DWP filing cabinet.
Postmen are fed up – we all are
Digital tools are not enough – dashboards are not enough, we do not need robots to tell us how to manage our investment drawdown and we don’t need a big pile of cash on deposit
The 140,000 postal workers in the Royal Mail scheme don’t want a saving scheme that just provides a lump sum when they pack up their postbags, they want a pension.