UK roundup: CWU rejects revised Royal Mail DB replacement scheme
The Communications Workers Union (CWU) has rejected the latest proposal Royal Mail has put forward for replacing its current defined benefit (DB) scheme.
The Royal Mail Pension Plan’s DB section will close to future accrual at the end of March next year.
On Friday the company, which operates the UK’s postal network, said it was offering members a choice between a new DB scheme and a new defined contribution (DC) scheme.
The DB plan would be a “cash balance” scheme, providing members with a guaranteed lump sum at retirement. Royal Mail said that under its proposal there would be “less need – or even no need at all – for members to give up [the] annual pension to get a tax-free lump sum” at retirement.
The company had already proposed a replacement DB cash balance scheme earlier this year, following an initial proposal from the CWU.
It said the total company contribution, at 15.6%, was the same as under its initial proposal, although the contribution to members’ retirement accounts would increase from 12.6% to 13.6%. The remaining 2% would be contributions for other benefits, such as death in service.
The company contribution to the proposed new DC scheme would be 13.6% of pensionable pay.
The CWU had strongly criticised the initial DB cash balance proposal from Royal Mail, and on Friday it said it rejected the company’s latest offer.
Terry Pullinger, deputy general secretary for postal at CWU, said: “It does not meet our aspiration of a wage in retirement pension scheme, but rather still promotes the conventional wisdom of a cash-out arrangement at the point of retirement.”
The CWU put forward its own idea for a new replacement scheme in March, and Pullinger said that although Royal Mail’s latest proposal used elements of that, “it would still represent a significant shortfall in the pensions promise and it is not something that we are prepared to recommend to our members”.
Unite has said it would hold a consultative ballot on the proposal starting this week, without making any recommendation to its members about accepting or rejecting Royal Mail’s proposal.
Brian Scott, Unite officer for the Royal Mail, said the proposals from Royal Mail were an improvement on what the company had initially proposed.
Royal Mail said it expected the overall cost of the proposal to be funded within its current £400m (€456m) annual pension contribution budget, and that the risk to the company of the proposed DB scheme would be materially lower than under the current plan.
Atomic energy pensioners call for investigation
Pensioners from the former UK Atomic Energy Authority (AEA) have called for an investigation into the circumstances leading to their pension scheme entering into the Pension Protection Fund (PPF).
Prospect, a trade union, is co-ordinating the pensioners’ campaign. It relates to the AEA Technology (AEAT) DB pension scheme, which was set up in 1996 following the privatisation of part of the AEA. Many people transferred their accrued rights to the scheme following privatisation.
The pension scheme entered the PPF’s assessment period in 2012 after its liabilities became too large for the sponsor to manage. It was fully transferred to the lifeboat fund in July 2016, with pensions paid based on PPF rules.
In a statement, Prospect said this meant pensions of scheme members were not paid in full. The PPF pays 90% of deferred members’ accrued benefits subject to annual cap of £38,505. No indexation is applicable to benefits accrued before April 5, 1997.
The union said that more than 3,000 members of the AEAT pension scheme lost on average one-third of their pension entitlement because of “business, government and regulatory failure” that led to the scheme entering the PPF.
The campaigners estimate a total shortfall in their pensions of £182m (€208m). They have called on the Parliamentary and Health Service Ombudsman to investigate what happened and recommend compensation.
Oliver Letwin, a member of parliament, said in October 2016 that the ombudsman should be able to rule on whether there had been “maladministration” in the way pensioners were informed about the new AEAT scheme.
It was noted in response that a complaint regarding information provided to employees about their pension rights would fall within the remit of the Pensions Ombudsman rather than the Parliamentary and Health Service Ombudsman.
The pensioners have previously made submissions to the Work and Pensions Select Committee and the Pension Ombudsman and complained to government departments, ministers, scheme trustees, and the PPF, but this had “fallen on deaf ears”, the union’s statement said.
PLSA moves ahead with diversity initiative
The UK’s trade body has chosen Northern Trust Asset Management as the “headline partner” for its diversity initiative, “Breaking the Mirror Image”, which aims to encourage greater diversity on trustee boards and across the pensions industry as a whole.
The Pensions and Lifetime Savings Association launched the initiative in March with the release of a collection of essays, and said that it will work with Northern Trust on a programme of events and training over the next year.
This will include a diversity leadership training programme and a one day diversity conference.
Hermes research costs
Hermes Investment Management is to stop passing on the cost of external analyst research to its clients, a spokesperson confirmed.
Under the Markets in Financial Instruments Directive (MIFID II), asset managers will be forced to pay for sell-side investment research and separate the costs for research from transaction costs to achieve full cost transparency for end clients, effective from January 2018.
Several asset managers have already said they would absorb external research costs rather than passing these on to clients.