Royal Mail Group has presented the government with alternative ways introduce CDC schemes in the country with minimum set of legislative changes
Royal Mail Group has presented the government with an alternative way to introduce collective defined contribution (CDC) schemes into the UK. It has proposed amending the rules governing money purchase pension arrangements as an easier and more practical way for introducing CDC schemes.
In a letter to Frank Field, chair of the parliament’s Work and Pensions Select Committee, Jon Millidge, group HR director at Royal Mail, said the company wanted to explore how to introduce a collective scheme with the minimum set of legislative changes, given the constraints on parliamentary time.
However, the Department for Work and Pensions has indicated that it has not yet prioritised secondary legislation to allow the creation of CDC schemes in the UK.
Millidge suggested amendments to the 1993 Pensions Scheme Act under the powers granted by the 2011 Pension Act as a possible alternative solution.
He said that the group’s proposal would enable such a pension scheme to be treated for legislative purposes as ‘money purchase’ and so exempt from the various ‘defined benefit’ employer funding and debt requirements which would otherwise apply to a plan which pays pensions from its own assets, rather than backing each member’s pension with an annuity.
Royal Mail announced its intention to launch the UK’s first private sector CDC plan in February in partnership with the Communication Workers Union, subject to a change in legislation. However, the union opposed the company’s plans to close the defined benefit pension scheme.
Referring to the joint proposal from Royal Mail and CWU, pensions minister Guy Opperman told a Work and Pensions Select Committee meeting in March that as yet it was too early to “assess the contents”. However, he added that the department is minded to assist, but at the same stage he does not want to give any cast iron guarantees, as this is still the very early stages. If it is the case that progress is possible, then it would wish to assist in that.