Royal Mail has launched the UK’s first collective defined contribution pension plan.
The collective plan pools members’ contributions and provides over 100,000 Royal Mail employees with both an income in retirement and a lump sum.
Royal Mail, the Communications Workers Union and Unite CMA have worked together to design and implement the scheme.
The parties agreed that any scheme has to provide one pension for all employees with at least 12 months service while also being affordable for Royal Mail and its people and providing an income in retirement.
Royal Mail director of group pensions, Angela Gough, said: “The Collective Plan is the future of pensions at Royal Mail and we believe it is the right scheme for our people and our company.
“Today heralds an exciting development for Royal Mail and for the pensions industry.
“We have worked hard with our unions, the government, the Pensions Regulator, and the Trustee of the Collective Plan to make it possible and we are delighted to have reached this point.”
The key benefits of the CDC include an automatic income for life, in addition to a cash lump sum, making it easier for people to manage their retirement.
Every employee with at least a year’s service is eligible to join.
Additionally, employees pay 6 per cent of pensionable pay into the collective pot each payday, and Royal Mail tops that up with a contribution of 13.6 per cent.
The scheme’s launch was welcomed by Hymans Robertson head of DC, Paul Waters, who said: “The launch of the Royal Mail CDC scheme is a highly significant milestone for the pensions industry.
“Delivering a brand-new type of pension scheme has taken a sustained effort from everyone involved, innovation on this scale is hard.
“CDC provides great value by delivering higher pensions for lots of savers alongside increased certainty their pension won’t run out in retirement, which is desperately needed.”
However, Waters added that it is important to recognise that the launch of the Royal Mail CDC scheme is just the beginning.
“The Royal Mail’s scheme was designed around specific objectives and the way it’s been set up will not be the best path for all schemes thinking about CDC,” he explained.
“Other employers will have their own individual objectives and profile of members, which means a range of different types of design will be needed to cater appropriately for different groups.
“As an industry we need to develop a broad range of DC risk sharing options to deliver the greatest benefit to future members.”
tom.dunstan@ft.com
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