Royal Mail is to discuss the introduction of a collective defined contribution (CDC) pension scheme with a guaranteed defined benefit (DB) element, following mediation talks with its main workers’ union.
Talks between the company and the Communication Workers’ Union (CWU) looked to have broken down this year after the union threatened strike action over Royal Mail’s proposed “cash balance” scheme to replace its DB fund, which will close at the end of March 2018.
Following mediation talks between the company and the union, mediator Lynette Harris – a professor at Nottingham Trent University and a member of the UK government’s Central Arbitration Committee – recommended that the two parties commit to the introduction of a CDC scheme, with an element of DB guarantee.
Harris also recommended establishing a “pensions forum” to support the introduction of the new scheme. The forum would focus on lobbying government for the changes to legislation that would be necessary for a CDC scheme to function.
Last month, a UK parliamentary committee launched an inquiry into the CDC concept, also known as ‘defined ambition’.
In a notice to the stock exchange, Royal Mail said: “Royal Mail and the CWU are continuing talks with the aim of reaching agreement on the full range of issues under discussion. Agreement on certain issues is more advanced than on others but all issues remain open for negotiation and final agreement.”
CWU’s video update to members regarding the negotiations with Royal Mail
Royal Mail said the mediation talks had “helped both parties to better understand their respective positions”.
Terry Pullinger, deputy general secretary for postal workers at the CWU, said there had been a “fundamental change” to the attitude of Royal Mail towards the discussions.
“I’m pleased to report that the strong position that we have taken has absolutely changed [the] direction in these negotiations,” he said. “We have, I think, a far more philosophical agreement with the employer as to how we take things forward. We’ve got to deal with the detail.
“The employer has now accepted that we will develop one pension scheme for all of our members, that it will be a wage in retirement scheme, that there will be an element of DB guaranteed and there will be an element of shared risk.”
Harris’ other recommendations included auto-enrolling members into the highest level of contributions for its DC scheme, two pay increases and a reduction in working hours.
Both Royal Mail and the CWU emphasised that Harris’ report was not an agreement, but that discussions were ongoing.
Xafinity to merge with Punter Southall
Two UK consulting groups are to merge some of their operations. Xafinity, which listed on the UK market earlier this year, is to buy the investment consulting, actuarial and administration businesses of Punter Southall Group for up to £153m (€174m).
At the same time, Punter Southall Group is to buy Xafinity’s independent trustee business, HR Trustees, and merge it into its existing PS Independent Trustees subsidiary.
Jonathan Punter, co-founder and CEO of Punter Southall Group, said clients would benefit from “increased scale and expertise”.
Paul Cuff, co-CEO of Xafinity, said the acquisition would enable the company to be a “clear alternative” to the “big three” consulting firms in the UK, Aon, Mercer, and Willis Towers Watson.
Strathclyde Pension Fund ‘fully funded’
Scotland’s biggest public sector pension fund is fully funded, according to its latest triennial valuation. The £20.8bn Strathclyde Pension Fund was 105% funded as of 31 March 2017.
The scheme recorded a 23% investment return in the 12 months to the end of March, boosted by favourable currency fluctuations .
At its latest committee meeting, the pension scheme’s trustees approved two new investments in its direct infrastructure portfolio, of £50m each into Hermes Infrastructure Fund II and Dalmore Capital Fund 3.
Legacy DC scheme costs down on £24.9bn of assets
Providers of legacy UK workplace pension schemes have reduced costs and charges to 1% or less on an estimated £25bn of assets under management over the past four years, according to a joint-update from the government and regulator.
The government and the Financial Conduct Authority (FCA) have worked with pension providers to bring down costs in legacy schemes since 2013, when a study from Office of Fair Trading identified around £30bn of assets in such schemes as being at risk of poor value for money. A subsequent report published by an independent project board, commissioned to investigate high charges, found that £25.8bn of assets in defined contribution workplace pension schemes were potentially exposed to charges of more than 1%.
Last December, the FCA and the Department for Work and Pensions found that assets under management exposed to this level of charges had dropped by £20bn.
Continued work with and by pension providers since then meant that costs and charges in these legacy schemes had been reduced to 1% or less on a further estimated £4.9bn of assets, bringing the volume of DC scheme assets facing lower costs and charges to £24.9bn.