All current scheme provisions and benefits will continue to apply for all previous pensionable service accrued in those schemes.

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1 Pensions Frequently asked Questions Introduction From 1 st April 2018 new pension arrangements will be introduced for all Royal Mail employees. In response to a number of enquiries from members about how the new pension arrangements will work, the CWU has produced this basic guide to answer some of the most frequently asked questions. It s important to stress that the new arrangements will only apply to your service in Royal Mail after 1 st April All pension benefits members have built up prior to that date in the two current schemes - the Royal Mail Pension Plan (RMPP) and the Royal Mail Defined Contribution Plan (RMDCP) - will be fully protected and uprated annually with inflation. All current scheme provisions and benefits will continue to apply for all previous pensionable service accrued in those schemes. The CWU recognise that pensions can be complex and ultimately what an individual receives from any scheme will depend on how long they ve paid into the scheme, what age they are and how much they earn. However we believe the new wage in retirement scheme and transition arrangements will provide the necessary level of contributions from the employer and employee and the right investment and governance arrangements to ensure all members enjoy security and dignity in retirement. What do I need to do now? From 1 st April 2018 all current RMPP members will automatically join the new Defined Benefit Cash Balance Scheme (DBCBS) that will guarantee a lump sum at 65. No action is therefore required. All current RMDCP members (with at least 5 years service in Royal mail Group (1 year in the nursery scheme and 4 years contributions to the DC Plan) can choose to join the DBCBS from 1 st April. To do this they need to complete the form titled Joining the Defined Benefit Cash Balance Scheme.

2 All current RMDCP members who have less than 5 years service in the scheme (one year in the nursery section and four years in the Plan) will automatically move to a new top tier of the DC Scheme where the employer pays 10% and the employee 6%. No action is therefore required. Employees can opt out of the above arrangement and pay in less (and therefore receive less benefits) by completing the form titled Choosing a different Royal Mail Defined Contribution Plan (RMDCP) Contribution Level. Once the new CDC Scheme is introduced all RMPP and RMDCP members will automatically join the new scheme. Why are the changes happening? The changes result from Royal Mail s original decision to close the RMPP to future accrual from 31 March 2018 and place current and future employees into the individual DC plan. In response the CWU put forward a ground-breaking alternative for a single collective pension scheme to provide an income in retirement with a Defined Benefit Cash Balance Scheme to provide a guaranteed lump sum. Since the defined benefit scheme (RMPP) was closed to new entrants in 2008 all new employees in Royal Mail have entered the (inferior) individual Defined Contribution Scheme (RMDCP). Like other DC schemes, the RMDCP has been characterised by inadequate contribution rates (just 12% currently pay the top tier) and uncertain outcomes. In addition all future responsibilities and liabilities for managing pensions when employees cash out in retirement fall on the individual. As a result, we currently have two tier pension provision in Royal Mail with different members in different schemes paying different contribution rates with different definitions of pensionable pay and wide variations in pension outcomes. In place of the endless pension changes, continued uncertainty and splintered pension provision, the new collective wage in retirement scheme will end two tier provision and put all members, young and old, on an equal footing.

3 What is the new pension scheme? The new scheme will comprise two elements: a Collective Defined Contribution (CDC) Scheme that will provide all employees with a wage in retirement payable until death and a Defined Benefit Cash Balance Scheme (DBCBS) that will provide a guaranteed lump sum at 65. The new CDC Scheme is designed to provide safe pensions for every CWU member for decades to come. CDC schemes have fixed contribution rates from the employer and members and share investment and longevity risk. They benefit from a reduction in costs through economies of scale and are simpler than DC for members who are not faced with making decisions about investments or what to do with their benefits in retirement. Royal Mail has agreed to 400 million a year into pensions (that s up 75 million a year on their original proposal). The target CDC pension will be 1/80 th of pensionable pay plus RPI revaluation. The employer will contribute 13.6% of pensionable pay into the new scheme and members will pay 6%. The guaranteed lump sum element will be set at 3/80 ths of pensionable pay. All members will contribute into one single scheme with pensions in retirement paid from one collective pot. It will be an entirely new scheme replacing the RMPP and RMDCP with a new growth-based investment strategy and a new governance structure and Trustee Board. What outcomes can I expect from the new scheme? The new scheme will target (but not guarantee) a similar level of benefits to those currently provided by the RMPP. By pooling the money going into one single scheme and taking a more growthbased investment approach, the new CDC Scheme is highly likely to deliver significantly better outcomes than Royal Mail s original DC proposal. Current RMPP members could enjoy similar benefits as they do now while there could be a large uplift in pension outcomes for current DC members.

4 Under the new scheme employees will still have the ability to take their pension early. It will also provide ill health, death in service and dependant benefits. When will the new scheme be introduced? The Pensions Agreement commits Royal Mail to introduce the new CDC Scheme as soon as possible. We are currently working closely with the company to lobby Government to make the necessary legal and regulatory changes to enact our scheme at the earliest opportunity. Once it s set up all members of the RMPP and RMDCP will automatically join it. While we are increasingly confident the changes will be agreed within reasonable timescales we have a clause in the agreement that says that after 12 months a judgement will be made on the likelihood of the new scheme being introduced within reasonable timescales or whether we reopen talks to develop a new resolution for pensions. What are the transition arrangements? Before the new collective scheme is introduced, transitional arrangements will apply. The CWU wanted the new scheme to start from April this year but as serious talks with the employer didn t start until after the strike ballot last October, we had to introduce transition arrangements to provide a stepping-stone into the new CDC Scheme. From the 1 st April 2018, all current RMPP members will automatically join a new scheme within the RMPP called the Defined Benefit Cash Balance Scheme (DBCBS) and will start building up benefits in this new scheme. Under the DBCBS, the company provides a guaranteed lump sum at aged 65. The company will contribute 15.6% of pensionable pay into the scheme. Of this 13.6% will go towards members guaranteed lump sum and 2% will go towards other member benefits including death in service and ill health. Members will contribute 6%. At age 65, members will receive a lump sum worth at least 19.6% of pensionable pay. The DBCBS will also aim to provide annual increases to the lump sum at or above inflation, but the giving of increases is not guaranteed.

5 All current RMDCP members with more than 5 years service in the scheme can join the new DBCBS. To do this, members need to complete the Joining the Defined Benefit Cash Balance Scheme Form provided in Royal Mail s pension booklet. All current DC members with less than 5 years service in RMG (1 year in the nursery scheme and 4 years in the DC Plan or those who have more than 5 years service but opt not to join the new DBCBS) will be placed onto a new top tier of the RMDCP where the company pays 10% and the employees 6%. This will happen automatically from 1 st April Members can also choose to pay less contributions and receive smaller benefits if they so wish by completing the form titled Choosing a Different Royal Mail Defined Contribution Plan (RMDCP) Contribution Level. Can I pay additional contributions? Yes. If you want to pay more than 6% of DBCBS pensionable pay you can make Additional Voluntary Contributions (AVCs) to Bonusplan or Flexiplan as now. Any contributions you currently make to Bonusplan and/or Flexiplan will continue. Any added year s contributions you currently make will stop when the current RMPP closes on the 31 st March RMPP members who take their age 65 benefits and leave the company (at any age) after the 31 st March 2018 will receive a one off payment of 750 from the company which they can use to obtain financial advice on retirement. This payment will be subject to income tax and National Insurance contribution. Can I still retire early? Yes. The new scheme as now will allow people to take their pension early (from the age of 55) subject to the usual actuarial reductions for early payment. What is the retirement age in the CDC Scheme? Traditionally, the retirement age has been linked to the date at which people receive the basic state pension. As the state retirement age is now 67 or 68 (for all those born after 1961), 67 has been chosen as the retirement date in the new scheme going forward. However, employees will still be able to retire early from the age of 55 subject to the usual reductions for early payment.

6 In addition those joining the new DBCBS Scheme have the option of increasing their guaranteed lump sum at 65 by contributing an extra 1% to the DBCBS lump sum element and the company will match this contribution with a further 1%. What is the definition of pensionable pay? Under current arrangements, members in different sections of the RMPP and those in the DC Scheme are all subject to different definitions of pensionable pay. In the new scheme all members will be covered by a single definition of pensionable pay which will consist of basic pay plus pensionable allowances and with no Lower Earnings Deduction. This means more of your earnings will be included in determining your final pension. What are the ill health benefits in the new scheme? In the new CDC Scheme members will receive 50% of basic pay (less Employment and Support Allowance) for up to 3 years plus a lump sum payment at the end of 3 years. Pre-2018 benefits built up in the current schemes will be paid from the date of leaving without reduction.