Now more than ever , Royal Mail’s CDC scheme looks a game changer

I was lucky to be among the participants in yesterday’s Westminster Business Forum and hear Jon Millidge and Terry Pullinger talk with pride of the CDC scheme they expect to launch for over 140,000 postal workers.

Millidge and Pullinger

At a time of great uncertainty, Royal Mail is creating a wage for life for its current and future staff and in so doing creating for itself a genuine and valuable employee benefit.

In place of strife

Pullinger, CWU’s Deputy General Secretary referred to Millidge as the intellectual arm of the partnership, which had me turning off my video to hide me laughing out loud. Millidge could is as pragmatic a former HR director as you will find and both men say it as it is. One of the pleasures of reporting on the growth of this great enterprise is to see how these two men have grown in friendship.

This personal accord is mirrored in the improvement in industrial relations at Royal Mail and to a large extent that is because the CDC scheme has become more than a solution to the specific pension problems at the organization, but a campaign for better pensions in the  UK . Jon’s  starting a career as a professional trustee and continuing as Director of Pension Reform at Royal Mail. Jon was formally Group HR Director.

For all the contention this new type of pension has created outside , Royal Mail has found the CDC scheme bringing people together. I have asked many postmen and I have not heard a bad word for the new arrangement.

A proper focus on people over 50

Pullinger was at pains to point out his problem. An increasing number of his members are in a DC plan and he focused on research suggesting 58% of us “over 50s” have made no financial retirement plans and only 8% feel comfortable in retirement. Millidge pointed out that those facing the choice of what to do with their pension pot get precious little support and are singularly ill-equipped to take life-changing decisions. For these men, the CDC is taking the burden of decision-making away and replacing it will the comfort of a wage in later age.

Pullinger accused the Pensions Industry of a “failure to take on board human behavior” and of starting a “stamped to insecurity and human poverty”. He called on the industry , for the sake of the over 50s to take up the challenge and move from DC to CDC pensions.

With an eye to future generations

Both men stressed that the design of their CDC scheme would avoid the creation of a buffer, paid for by one generation (the young) and potentially enjoyed by another (the old).

The alternative, the system of controls based on the turning on and off of different levels of indexation , had been tested by both Willis Towers Watson and Aon and found to deliver better value for the money put in.

Millidge talked of the explicit rules that would govern the distribution of indexation and the occasional reduction in the nominal value of pensions. Crucially future funding would be based on best estimates of future growth and not the prudential forecasting that has caused the virtual lockdown of our Defined Benefit System.

Indeed they talked of headroom baked in for future generations with the annual declaration of future pension increases becoming a cause of expectation and excitement in the workforce.

Better value for the company

The gains for workers are not , as appear to be happening in DB, being created from the bottomless coffers of the sponsor. They are being created by the CDC fund being exposed to the growth of real assets invested with the skill of an in house investment team as well as external fund managers.

These resources can be afforded because of the scale of the operation and because of efficiencies in administration created by this collective endeavor. Millidge announced that in technology provider to deliver the administration of the scheme is already in place.

In terms of public relations, Royal Mail continue to mine a deep seam of support both from its workforce and from Government. To quote Pullinger at yesterday’s meeting

“Everyone is walking on the same side of the road”

Taking the pensions industry with them

Pullinger went on that he and Millidge were “coming at us from the streets” and so it seemed. They are not talking the language of “pensions” but of a “wage in retirement”, could this be the re-brand that Martin Lewis called for at the PLSA conference last month?

There is a lot of skepticism about CDC and its power to revitalise pensions in this country, but there is none at Royal Mail. The only disappointment I had listening to Millidge and Pullinger , was that there were so few others on the call to hear them.

Within the next few days, their section of the Pension Schemes Bill should pass onto the statute books and Royal Mail will be able to press on with its reforming agenda, continuing to encourage others to follow them, most particularly DC master trusts.

Both Millidge and Pullinger were at pains to thank the DWP and in particular the Pensions Minister for supporting the legislation through parliament.

It is easy to scoff, and many will. But the future for the mass of us struggling with freedom is collective , open and fair.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Now more than ever , Royal Mail’s CDC scheme looks a game changer

  1. Brian G says:

    Excellent news, this could indeed be a valuable alternative to individual drawdown and individual risk management. Not for all, but a potentially valuable option.

  2. Pingback: Will CDC be a success story? | AgeWage: Making your money work as hard as you do

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