Common sense to the rescue; Royal Mail and the CWU adopt CDC.


The last thing this country needs is more strife over pensions. With the BSPS Time To Choose election window , drawing to a close, it’s good to know another vexatious chapter will not be opened,

Whichever side of the dispute you sit, I hope you will join with me in congratulating the Royal Mail and the CWU for finding a workable solution that avoids a strike, pays posties a wage in the retirement and doesn’t tie up investable capital in unwanted guarantees.

In the dispute, both sides have agreed in principle to a mediator’s recommendation to adopt a collective defined contribution (CDC) pension scheme with a defined benefit element. CDC was authorised by primary legislation in 2015,   Regulations to make it possible have not yet been enacted. Labour has come out in favour of such regulations, and the Conservatives are expected to announce their position in the new year.

Here is Royal Mail’s summary of the mediator’s recommendations:


  • Royal Mail and the CWU should commit in principle to the future introduction of a Collective Defined Contribution (CDC) scheme with a Defined Benefit element.
  • To support the introduction of a CDC scheme for all, Royal Mail and the CWU should establish a Pensions Forum. The Forum will have responsibility for lobbying the Government to make the necessary legislative and regulatory changes so that a CDC scheme can be established, and for overseeing its governance.
  • In the meantime:
  • For members of the Royal Mail Pension Plan (RMPP), Royal Mail should implement — from 1 April 2018 — a Defined Benefit cash balance scheme on the terms already proposed by the Company.
  • In addition, existing Royal Mail Defined Contribution Plan (RMDCP) members with five years’ or more continuous service in the standard section of RMDCP should have the option of joining the Defined Benefit cash balance scheme.
  • Royal Mail should auto-enrol current and future members of RMDCP to the top tier of contributions (10 per cent from the Company and 6% from the member).

Here is Terry Pullinger, CWU Deputy General Secretary (Postal):

“[T]he employer has now accepted that we will develop one pension scheme for all of our members. That it will be a Wage in Retirement Scheme. That there will be an element of defined benefit guaranteed, and that there will be an element of shared risk. But it will be targeted to genuinely produce a pension in retirement for people. It will not be a scheme that simply cashes out the moment you retire. It will be a Wage in Retirement Scheme.”

What Pullinger refers to as a Wage in Retirement Scheme is not, however, the pure DB scheme with discretionary as well as defined benefits originally proposed by First Actuarial.

Rather,  the ‘shared risk’ element involves the mediator’s recommendation of CDC:

“…to have the scheme that we would like, the scheme that I’m describing to you, there has to be legislation introduced. It’s already law in this country. But the regulations for that legislation have not [yet] been drawn up. …We are now jointly connecting with people to try and ensure that we drive through that legislation as quickly as possible to enable our new scheme as we develop it and agree it. …that may go on for some time [so] we’re also dealing with transitional arrangements.”

I’m looking forward to the two meetings of the Friends of CDC  next week and I hope it will result in a helpful submission to the DWP’s consultation early in the new year!

Thanks to Mike Otsuka for his help in publishing this report. The basis of this article is Mike’s post here. I hope that Mike will join us at Congress House, an invite has been sent!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Common sense to the rescue; Royal Mail and the CWU adopt CDC.

  1. Con Keating says:

    That should end the naysayers’ arguments that there will be a total absence of demand for CDC arrangements.

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