This £2.45bn was until in a Royal Mail DC plan which has until recently been managed by Scottish Widows as an occupational DC trust run for Royal Mail Staff. The £2.45bn is now in an L&G DC master trust
While this is “news” to a wider public, its agreement was announced to Royal Mail staff some time ago. The announcement was made by its CWU union back in March
The FAQ in Appendix B of the Assistant Secretary’s letter to the 104,000 members with DC pots does not seem to address the CDC option. Around 60,000 of the DC members are still employed by Royal Mail and mostly in the Collective (CDC) Plan. If I was in the CDC plan, I’d be expecting to have all my money in one place – my ongoing workplace pension.
There are wo questions for us here; the first why move from Scottish Widows – the second why not transfer to its Collective (CDC) Plan boosting the wage in retirement of 100,000 postal workers?
What does this say about Scottish Widows? Why were they fired?
The £2.5bn that has built up in this Scheme resulted from a contribution from Royal Mail that was (relative to almost every other DC scheme) generous.
The scheme became paid up when the Collective CDC Plan opened,
It is understandable that Royal Mail had no further appetite to be paying for the running of its own DC occupational scheme. But that does not explain why the incumbent platform manager and administrator are being fired. They are part of Lloyds Bank Group – what is wrong with that provenance?
The contract to manage administration and the pot management of the Royal Mail DC scheme was awarded to Zurich (previously Eagle Star) and moved to Scottish Widows when the Zurich corporate pensions unit was sold. It was the jewel in Zurich and Scottish Widows’ crown.
Scottish Widows runs a master trust. If the money was to stay in pots, why did this £2.45bn not move to that?
L&G has confirmed the transfer of £2.45bn in assets and some “100,000” members from the Royal Mail Defined Contribution Plan (RMDCP) to the L&G Master trust. This from Corporate Adviser’s report based on a press release
The transfer represents the largest completed transition into a UK defined contribution (DC) master trust to date. L&G said it will combine operational expertise, member engagement and governance capabilities to support members in meeting their retirement needs.
The RMDCP had been administered by Scottish Widows throughout its lifetime and trustees chose L&G for its “leading member experience and administration offering, investment proposition, value for money and its ability to deliver large-scale scheme transitions”.
L&G head of UK DC distribution Jayesh Patel said: “The appointment reflects the trust our clients place in our ability to deliver transitions of this scale, while providing strong value for money and helping members achieve better long-term retirement outcomes.”
This looks very bad for Scottish Widows who have substantial corporate clients in their master trust. If they can’t transfer Lloyds Bank staff’s DC arrangements, – they’ve got at least three times as much as is in the Royal Mail DC Plan in Lloyds “Your Tomorrow DC scheme”.
This is a big blow to the Scottish Widows master trust that is struggling to absorb “Your tomorrow“. Can this undersized master trust get to £10bn by 2010 , let alone to £25bn by 2035unless it can take on this kind of scheme?
What does this say about Royal Mail?
The second question this should prompt is why the pots of post workers have not been transferred to the Royal Mail Collective (CDC) Pension Plan.
The 104,000 members of the Royal Mail DC plan are mostly still working for Royal Mail and accruing pension under its hard won and expensively introduced CDC plan.
There may be one of two reasons for members of the the RMDC Plan, not being defaulted into its Collective Pension Plan. The first may be operational. There may be issues with the administration or actuarial pricing of “transfers in”.
The second may be that either the trustees of the DC scheme or the Royal Mail themselves did not want to open the Collective (CDC) plan to transfers. This opens questions of commitment to the idea behind collective pensions.
Either way, if I was a Royal Mail post worker contributing to the Collective CDC Plan I’d be asking why my DC pot isn’t buying me more pension?
Transfers are very important to CDC schemes. Without DC money transferring to CDC schemes, members will have no chance to boost their pensions the CDC way.
If I was a trustee of the Royal Mail Collective (CDC) Plan, I’d be wondering how committed their stakeholders are. These include unions, advisors and sponsors.What has happened to the original determination to provide postal workers with a wage in retirement.
Either way… this seems odd.
The CWU did issue this briefing to members back in March, Henry:
http://www.cwu.org/ltb/ltb-087-26-royal-mail-winding-up-the-rmdcp-scheme-transfer-of-member-assets-to-legal-and-general-mastertrust-in-july-2026/
But the FAQ in Appendix B of the Assistant Secretary’s letter do not seem to address the CDC option you point to …
https://rmcollectiveplan.com/other-pensions
“Currently, you are not able to transfer other pensions into the Collective Plan. If this changes in the future, we will update the information shown here.”
There are problems with swapping pots for pensions when you are running your CDC plan the way that Royal Mail’s doing.
This has been a consideration for CDC UMES plans who see CDC as a place to consolidate disparate pots when people want an increase to their wages in retirement.
I was given to understand that the Royal Mail DC Plan was designed purely as a temporary arrangement building and holding pots until they could be transferred into the Royal Mail CDC Scheme.
Reading the union notice linked by Derek, I do wonder if this is not still the plan and the decision was partly made considering the likely investment performance over a limited timeframe. Hence the quote “The assumption that Scottish Widows adopts in terms of investments is that members will take their pension pot at age 65 (although it can be taken from age 55).” This suggest that the relative lifestyle modelling was a factor being considered.
It may therefore be that a future transfer into the Royal Mail CDC Scheme is still envisaged, perhaps on an individual member elective basis.
An interesting take and let’s hope that option is available for those who have bought into CDC!
Also
If the members of the RM DC plan have left employment with Royal Mail they may not have the option to transfer in to the CDC scheme. They wouldn’t have that possibility if it were a DB scheme.
The concept of a single premium CDC pension has not yet been discussed but if you want to close your DC scheme and not transfer deferred members into another DC scheme you may investigate offering members a single premium pension based on the transfer. There are issues here to do with keeping in touch with members but that goes to pot or pension.
There are deeper difficulties in calculating pension entitlement from single premiums of whatever kind and this may be the problem for Royal Mail. It would be great to hear from the employer, Trustees or scheme actuary on this. It is germane to the development of CDC as DC to CDC transfers are essential.