Royal Mail, Union Make Headway in Pension Talks

Company changes position on wage-in-retirement plan.

UK postal service provider Royal Mail and the Communications Workers Union (CWU) both said they were encouraged by progress being made during mediation talks between the sides.

“The mediation process was helpful in bringing Royal Mail and the CWU together to advance the discussions,” said Royal Mail in a statement. “Mediation has helped both parties to better understand their respective positions.”

The Royal Mail and the CWU have been in a dispute over the company’s proposal to close its defined benefit pension plan on March 31, 2018. Royal Mail had proposed offering a choice between a new defined benefit scheme, and a defined contribution scheme. The union balked over what it said was a plan in which workers would simply cash out when they retire.

The union, which has threatened to strike over the planned pension changes, has proposed an alternative single plan to replace the closing defined benefit plan, and the current defined contribution plan, which it said was providing inadequate outcomes for its members upon retirement. It is the union’s position that there should be a single pension plan that offers a ‘wage in retirement.’

“We have, I think, a far more philosophical agreement with the employer,” said Terry Pullinger, deputy general secretary postal, in a video statement to union members. “The employer has now accepted that we will develop one pension scheme for all of our members.”

He added that the pension plan will be a “wage-in-retirement scheme,” and that there will be “an element of defined benefit,” and “an element of shared risk.”

The Royal Mail had previously rejected the proposal of a so-called wage-in-retirement pension after it determined that such a plan would be vulnerable to volatility. According to the mediator’s report, the company said the volatility “would impact on the funding of the scheme and, under current accountancy regulations, the company would quickly be shown as technically insolvent on its balance sheets.”

However, Royal Mail has since opened up to the wage-in-retirement plan.

“That is a significant shift by any standards,” said Pullinger. “The fact they’ve accepted that has sparked a completely different conversation with how we take it forward.”

In her report, the mediator said that under current legislation, a wage-in-retirement pension “would fit within the legislative framework” applicable to defined benefit plan. However, according to Pullinger, the regulation for that legislation has not yet been drawn up. He added that despite the Parliament being preoccupied with Brexit negotiations and being slow moving in general, there was “huge optimism” that they can move the negotiations forward.

Pullinger said they will continue the talks as long as progress is being made, and negotiations remain balanced and sensible.

However, “the moment we sense that that is not the case, if it is some ploy on their part to just try to drag this union along, we will soon sense that in these talks,” warned Pullinger, “And if that does transpire, then we will come back and hit them with everything we’ve got.”

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