Today, an influential parliamentary committee placed the “pioneering” pension deal of Royal Mail under the spotlight.
Guy Opperman, the Pensions minister, informed the Work and Pensions Committee that the government is looking for the simplest way to launch collective defined contribution (CDC) pension schemes to the United Kingdom.
Recently, Royal Mail agreed pay and pensions deal with its main union – Communication Workers Union that has the 110,000 members – putting a close to a bitter and protracted industrial dispute. As the postal workers prepared for their first post-privatisation strikes in 2017, the shares of the company plunged, and Royal Mail was booted out of the FTSE 100.
The postal giant recovered in the most recent reshuffle after approximately £2bn has been placed on its market cap since a nadir in November 2017.
As a part of the agreement, Royal Mail will launch a CDC pension scheme. This has been billed as a halfway house between a defined benefit fund and a defined contribution scheme. A defined benefit fund is where members will receive a final salary while a defined contribution scheme is where retirement payouts will be dependent on the investment performance of underlying assets.
CDC schemes guarantee that retirement savings are worth a minimum amount. These are popular abroad, particularly in the Netherlands. However, there is a lack of legislation in the United Kingdom allowing them to be introduced.
Opperman said that the government was attempting to look for a way of utilising the current statute. He said: “But there is still a long way to go.”