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The new model was the result of months of negotiations between Royal Mail and unions including the Communication Workers’ Union (CWU) and Unite, supported by advisers such as First Actuarial.
Angela Gough, director of group pensions at Royal Mail, said: “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 [trustees] to make it possible and we are delighted to have reached this point.”
Breaking the mould
Andy Furey, national officer at the CWU, said the CDC plan “heralds a new pensions era”, while Gary Sassoon-Hales, chair of the FTR committee at Unite and the Communication Managers Association, said the new scheme “breaks the mould of existing UK pension schemes and shows that there is indeed another way”.
Furey added: “We are confident the innovative benefits within the [CDC] plan will provide a better outcome for our members than a traditional defined contribution scheme. The twin attributes of an income for life and a guaranteed lump sum at retirement are important benefits for our members.”
Venetia Trayhurn, chair of trustees of the Royal Mail Collective Pension Plan, said: “With over 100,000 members at launch, the plan will immediately become one of the biggest single-employer, private-sector schemes in the UK.
“As chair of the corporate trustee that will oversee the new scheme, I would like to thank all our advisers, service providers and the executive team for their support throughout the authorisation process, and in preparing for this moment.
“The trustee directors are looking forward to putting this new model into action and delivering for our members.”
What the CDC scheme looks like
Any member with 12 months’ service at the company will be eligible to join the scheme, which is designed to provide an income in retirement and a cash lump sum on retirement.
It is expected to serve more than 100,000 people. Members will contribute 6% of salary, while the company adds 13.6%.
WTW and law firm Slaughter & May helped Royal Mail design the scheme, which was authorised by the Pensions Regulator (TPR) in April 2023.
TPR’s executive director of market oversight Neil Bull said: “The launch of the first ever UK CDC pension scheme is a significant moment for pension saving in the UK, providing another option for trustees and employers. We support innovation in savers’ interests and will now supervise Royal Mail’s CDC scheme to make sure it offers value and security to savers.”
Paul Waters, head of defined contribution at Hymans Robertson, said the launch was “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,” Waters said. “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.”
Further reading
TPR authorises first CDC pension scheme (14 April 2023)
Why one master trust is exploring CDC (8 November 2023)
CDC: Making progress towards a collective goal (29 May 2024)
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