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Providing Support for CWU Members in the Coventry Area Branch

Last Updated Friday, 20 June 2008

Pension Reform—Campaigning for a Fair Deal

 

Members will be aware that on the 1st April 2008 Royal Mail Group Ltd unilaterally imposed a number of adverse changes to your Occupational Pension Scheme.  This represented a serious assault by the business on your expected pension benefits.

 

The main changes to the scheme that the business imposed are:

 

The current pension scheme was closed to new members and new recruits from the 1st April 2008.

 

The retirement age for pension purposes will increase from age 60 to age 65 from April 2010.

 

Pension accrued after 1st April 2008 will no longer be up rated and calculated on the basis of members Final Salary, but calculated on the basis of Career Salary Defined Benefit (CSDB) indexed by the Retail Price Index (RPI) to a maximum of 5% annually.

 

For new employees a Defined Contribution (DC) pension plan to be offered after 1 years’ service.

 

What do these changes mean to CWU Members and what is the CWU’ position?

 

Firstly existing employees who had not joined the Pension Scheme before 1st April 2008 will not be allowed to join.  Instead for existing non-scheme members and new entrants recruited after 1st April 2008 the option of a Defined Contribution Pension Scheme will be offered after 1 year’s service.

 

A Defined Contribution (DC) Pension Scheme is vastly inferior to the current Defined Benefit (DB) Pension Scheme.  The DC Scheme that will be offered by the business gives no guarantee at all on any pension benefits at the time a member retires.  Instead, at the time of retirement, members have to use the money that has been paid into the DB Scheme to purchase a private pension from an insurance company.  The pension benefits that will be available will, inevitably, be less than what would be available under a Defined Benefit Scheme.  The Business will now be creating a two-tier workforce.

 

For existing Pension Scheme members the first hit on your expected pension is the decision by the business to break the link with final salary for all pension service after 1st April 2088 via the introductions of a Career Service Defined Benefit (CSDB) Scheme.

 

What this means is that pension service earned up to April 2008 will still be paid at retirement age based on a members final salary at the time of retirement.  So if you joined the scheme in April 1988 you would have 20 years service payable at retirement age based on your final salary.

 

However all future pension service after April 2008 will not be calculated on a final salary basis, but on the new CSDB calculation.  The easiest way to understand how this may affect your expected pension, is that you will lose out on pension benefit if either of the following 2 issues occur:

 

Any year until your retirement where the pay increase is above inflation figure (RPI)

 

Any year until your retirement where the annual inflation figure (RPI) is above 5%

 

Royal Mail Pension Fund Page 1