Consultation on the termination of accrual in the POL section of the Royal Mail Pension Plan

Transcription

1 Consultation on the termination of accrual in the POL section of the Royal Mail Pension Plan Body of evidence from the CWU to Post Office Ltd and the Trustee of the RMPP May 2016

2 CONTENTS Section 1 Executive summary 3 The basis on which the salary link was given up 3 Issues for the Trustee 4 Contractual issues for the Post Office 5 Quality of consultation 6 Alternative proposals 6 2 Background information 8 The basis on which the salary link was given up by members 8 Current proposals 10 CWU position 11 The current position of the Plan consistent with the 2012 valuation 11 Investment strategy 13 CWU position 13 3 Issues for the Trustee 14 Is allowing closure in the members interests? 14 Use of Released Assets 15 Continuing accrual vs Securing existing benefits 17 Is a buy-out more secure? 19 CWU position 19 4 Legal issues 20 Ill health and Redundancy benefits 20 Nominal salary Crown Office Staff only 22 CWU position 22 5 Quality of consultation 23 Predetermined outcome 23 Contractual benefits 24 Security of members benefits 25 Lack of an alternative in the Post office s proposals 26 Alternative proposals 26 CWU position 28 6 Effect on members 29 Benefit illustrations 29 Members reaction 30 7 The Business case 33 Appendices Appendix A: Documents Relating to the 2014 benefit change 35 Safeguarding your pension The Company s pension proposal 36 Your pension proposal Our decision - Covering letter 38 Letter from RMPP Trustee to members, October Appendix B: Collective agreements 42 The Ill Health Retirement Agreement of 1 May The Managing the Surplus Framework (MTSF) of October Appendix C: Documents relating to members reaction 52 2

3 1 EXECUTIVE SUMMARY 1.1 This submission to Post Office Limited s pension consultation is made by the Communication Workers Union, a recognised union representing members affected by the consultation. It has been prepared jointly by the Communication Workers Union and their pension advisers, First Actuarial. 1.2 There are three principal parties involved in a defined benefit pension scheme: the members to whom benefits have been promised, the sponsoring employer which made the promises, and the trustees whose role it is to deliver the promises made to the members by the employer. 1.3 In this consultation response, we have raised a number of issues, some of which are important to the Trustee. The benefit changes proposed by the Post Office can only be made with the co-operation of the Trustee. Therefore we have submitted our consultation response to both the Post Office and the Trustee. We would like both the Post Office and the Trustee to consider carefully the representations we have made on behalf of the members in our capacity as their recognised union. THE BASIS ON WHICH THE SALARY LINK WAS GIVEN UP 1.4 It is entirely clear that the premise of the 2014 benefit change was that part of the salary link on pre-2008 benefits would be given up and the assets released by this change would subsidise continued benefit accrual. 1.5 It was recognised by the Post Office that the Plan s current assets would remain in the Plan for the benefit of Plan members. 1.6 Fundamental to the Trustee s agreement to the benefit change, which reduced the value of the salary link on pre-2008 benefits as well as the value of future accrual, was the continuation of benefit accrual. This was the upside to counteract the down side of the benefit reductions. 1.7 It is clear from the quarterly updates that nothing material has happened in the experience of the Plan since the 2012 valuation date to disturb the agreement between the Post Office, the Trustee and members, that the assets released by the reduction to the salary link on pre-2008 benefits should be used to subsidise further benefit accrual for members. 3

4 ISSUES FOR THE TRUSTEE Use of released assets 1.8 The Trustee must not break the 2014 deal so soon after it was struck. The assets released by the reduction in the salary link have not yet been fully used to subsidise further benefit accrual. The subsidisation of future accrual was the upside which enabled the Trustee to agree to the changes to the Plan. If accrual is terminated so soon after the deal, the Trustee s decision to agree to the changes is fatally undermined. 1.9 Taxpayers provided the POL section with assets for the funding of the salary link, and members exchanged part of the salary link for continued accrual. This was intended to have a broadly neutral effect on total benefits. It would be wrong to appropriate taxpayers money given for the purpose of providing members with benefits for the different purpose of paying for a buy out of lesser benefits. The assets were provided for the provision of benefits, not for the purpose of subsidising a higher cost of insuring lesser benefits. Consequences of closure 1.10 Because the Trust Deed and Rules does not already have wording covering the situation of closure, it does not follow that closure to accrual results in members being given leavers benefits. The consequences of closing to accrual are also the subject of decision making. The default position must be no change, that is, closure to accrual does not bring an end to the salary link on pre-2008 benefits. Closure to accrual should mean exactly that, accrual is ended, but otherwise benefits for service to closure date should be unaffected Were the Trustee to agree to amend the scheme to permit the Post Office to close the scheme to accrual and to trigger a winding up of the POL section, there should be something in it for the members. That is, the Trustee should apply the same kind of thinking as they did prior to the 2014 changes. If there is nothing in it, the Trustee should simply refuse to allow the scheme to be amended Were the Trustee to agree to the closure to accrual, the Trustee must ensure that the decision to close does not bring other detriment to members: Revaluation rates must not be reduced to the statutory minimum for leavers. The members are not leaving service. The rules for the revaluation of members benefits must (at least) stay as they are. The Trustee must act to rectify the detriment to members from breaking the deal associated with the 2014 changes. This could be done by partially reinstating the salary link, for example. The premise of the 2014 deal was that salary link was reduced in favour of further benefit accrual. If the Trustee 4

5 agrees not to provide that further benefit accrual after all, then the natural quid pro quo is to partially restore the salary link. Continuing accrual vs securing existing benefits 1.13 It is NOT in members interests to terminate accrual and insure the Plan. All this does is minimise the members defined benefits. Insurance is the most expensive way possible to provide benefits, it provides least pension in return for the Post Office s and the members contributions and the assets which taxpayers provided. The benefit gain from further accrual outweighs the potential loss were the Post Office to become insolvent and the benefits reduced to PPF compensation amounts. Is a buy out more secure? 1.14 The Trustee should take great care not to undervalue the potential for Government support of the Plan. No doubt the Government would be very reluctant to give more support for either the Post Office or the Plan directly, but support may be compelled either by the pressure of public opinion or TPR s powers. The financial strength of the Government is superior to the financial strength of an insurer. Moving away from a position which has the potential for Government support should not be done lightly. CONTRACTUAL ISSUES FOR THE POST OFFICE Ill health and redundancy benefits 1.15 Under the Managing The Surplus Framework Appendix 6, a member of the RMPP has a contractual entitlement to a service credit in the event of redundancy over age 55 of up to 37.5% of the Reckonable Service which could have been attained if service had continued to Under the Ill Health Retirement Agreement of 1 May 2009 item 12.2, a member of the RMPP has a contractual entitlement to a service credit in the event of ill health retirement of the biggest of: 6 2/3 years A credit which will increase total service to 20 years 75% of the time remaining to age If the Post Office s proposal to cease accrual in the POL section of the RMPP from 31 August 2016 goes ahead, CWU believe that members will still be entitled to these terms on redundancy and ill health, which exist contractually outside of the rules of the RMPP. 5

6 Nominal salary 1.18 The pay agreement of 2007 included provision for members to elect to contribute on and receive benefits based on a higher nominal salary. The agreement provides that the nominal salary would continue in all circumstances going forward. This should include employer contributions to a DC scheme based on the nominal salary. We see no reason why the maintenance of the Notional Salary option should depend upon the type of scheme offered. All circumstances means exactly that, it does not mean in circumstances of a DB scheme but not in a DC scheme. QUALITY OF CONSULTATION 1.19 A central theme of the Post Office s justification of its proposals is that closure of defined benefit accrual and switching to defined contribution improves members benefit security. We argue that the Post Office s proposals do not have this effect It is clear that the Post Office has not considered any alternatives other than providing defined benefits in the manner in which they are currently provided and switching to defined contribution. There are practical alternatives to switching to DC which the Post Office has not considered. Members have not been provided with alternatives to give feedback on Important details of the benefit changes affecting special benefits on redundancy and ill health retirement were not given in the Facing the Pension Challenge booklets, but emerged in the FAQs. These changes have not been properly proposed and consequently should not be implemented after this consultation The Post Office has failed to engage in a meaningful consultation with Plan members. Their failure to consider practical alternatives indicates their only intention is to close the Plan and use members money, which ought to be supporting benefit accrual until at least 2018, to fund a buy out or other de-risking of the investments. ALTERNATIVE PROPOSALS 1.23 Greater pension productivity is good for everyone: it is good for members, who can have bigger pensions for given contributions, and good for employers, who can provide an attractive pension scheme at an affordable cost For a defined benefit pension scheme to be invested largely in bonds destroys its cost efficiency relative to defined contribution, a DC scheme would at least be invested in productive assets pre-retirement until retirement approaches. A DC scheme would be expected to provide a bigger benefit for the same contribution than a bond invested DB scheme. It is better to find a way to run a DB scheme with investments in growth assets than to run a DB scheme with investments in bonds. 6

7 1.25 Looking away from the RMPP and starting with a clean sheet, a scheme might be built on the following principles: The members contribution rate is 6% and the employer s contribution rate is fixed at 17.1%. For there to be next to no reliance on the employer s covenant, and for the employer to be confident that it is unlikely to be required to contribute at a higher rate, the scheme design needs to be such that it can be delivered within this contribution rate. For cost efficiency, the investment strategy is a diversified portfolio of growth assets. For a defined benefit scheme to have a useful purpose, it needs to be more cost efficient than a DC scheme We propose the next 22 months are spent developing a new design within these parameters, which could be implemented from April 2018 if continued accrual in the Plan cannot be continued beyond then. 7

8 2 BACKGROUND INFORMATION THE BASIS ON WHICH THE SALARY LINK WAS GIVEN UP BY MEMBERS 2.1 In 2013, the CWU (and Unite) agreed with the Post Office s proposal to place a cap on future increases to pensionable pay. The proposal was also accepted by the Plan Trustee who reflected it in changes to the rules of the RMPP. The 2014 benefit changes were not discussed at length between the Post Office and the recognised unions as it was accepted that it should follow the blueprint established in Royal Mail. 2.2 A key part of the 2014 solution in both the Royal Mail and Post Office sections was the commitment that the assets released by members losing the link to final salary would be used to provide ongoing benefit accrual in the Plan. In other words, members would give up one form of accrual (the difference between past service benefits on current pay and past service benefits on future pay) for another form of benefit accrual (the building up of career average benefits in the future). Had this commitment not been given and received in good faith by the unions and the Plan Trustee, the CWU would not have agreed to the proposal or recommended it to their members. 2.3 It should also be noted that the assets released by applying the pensionable pay cap were originally left in the Plan to provide benefits for RMPP members. The settlement reached which resulted in the creation of the RMSPS and the transfer of pre-2012 benefits left sufficient assets in the Plan to pay for the salary link and a small period of CARE accrual. That settlement was agreed by Government, the businesses (Royal Mail and the Post Office), the RMPP Trustee and the recognised trade unions, and was the subject of lengthy negotiations with the European Union under its State Aid restrictions. 2.4 Appendix A contains relevant correspondence about the benefit changes of 2014 including: Safeguarding your pension The Company s pension proposal Our pension proposal covering letter Safeguarding your pension The Company s decision Your pension proposal Our decision covering letter Letter from RMPP Trustee to members, October

9 2.5 Relevant quotations from these documents are set out below. The emphasis added is ours: From: Safeguarding your pension The Company s pension proposal Page 3 We do not want to close your Plan. We do not want to raise your contributions. We know how much you value your membership. Page 3 No change to your contribution rate. No change to your accrual rates or normal retirement age. The company would maintain its current rate of contributions to the plan. The Plan would remain open (i.e. you can continue to earn pension benefits each year) for the foreseeable future subject to the Plan remaining commercially viable. Page 3 We considered closing the Plan we do not want to do this. Page 3 We do not believe any of these options are attractive [closure, higher contributions, increased retirement age, reduced future benefits] Page 4 We would pay for our proposal in part by using some of the assets left in the Plan (approximately 170m) after the pension transfer to Government last year. Page 4 The Plan s assets would then be used to help fund the gap between the Company s existing contribution rate and what would be required to fund our commitment to keep the Plan open. In this way, the Plan s current assets would remain in the Plan for the benefit of Plan members. Page 5 Many companies are closing their Defined benefit pension schemes. If we can obtain support from our unions and other stakeholders, we would keep the Plan open in the immediate future, notwithstanding the significant cost increase. We cannot give any guarantees as to how long the Plan would then stay open, but we can confirm that our present intention would be to keep the Plan open for so long as we consider it commercially viable to do so. From: Your pension proposal Our decision covering letter Our proposal is designed to safeguard the Plan and keep it open at a time when other companies are closing theirs down Without this action we would be forced to close the Plan. Letter from RMPP Trustee to members, October 2013 POL stated its commitment that it would keep the RMPP open for the foreseeable future (subject to it remaining commercially viable to do so). The Trustee concluded that agreeing to the POL proposal is the best outcome for the membership as a whole in the difficult circumstances, given the alternative of closure. 9

10 The Trustee examined and considered various matters including: The fact that POL had informed the Trustee that unless it was able to make the proposed changes it would have to seek to close the RMPP. The fact that POL was providing a commitment that the RMPP would remain open for the foreseeable future (subject to it remaining commercially viable to do so). the Trustee needed to weigh up the possible disadvantages of the proposal (some members pensionable pay increasing at a lower rate than their actual pay whilst the RMPP remained open) against the overall benefit of agreeing to the proposed rule and the RMPP remaining open. On the basis of this analysis which looked at the expected benefits that would be earned where the Company sought the closure of the Plan, the Trustee concluded that the proposal was the best outcome for the membership as a whole in the difficult circumstances. CURRENT PROPOSALS 2.6 Under the proposals currently being made by the Post Office, the assets released by the removal of the link to final salary will no longer be used to provide ongoing accrual of benefits. Instead they will be used within the Plan either to provide an additional safeguard against the Post Office ever having to make deficit contributions or to facilitate a buy out of the benefits with an insurance company. 2.7 While this is being portrayed by the Post Office as a benefit to the members - in the form of additional benefit security we believe there is very limited upside for members (see our comments in section 5 on benefit security). Rather, the proposal is that assets released by taking away benefits from members should be used primarily for the benefit of the Post Office and its shareholder. 2.8 It is entirely clear that the premise of the 2014 benefit change was that part of the salary link on pre-2008 benefits would be given up and the assets released by this change would subsidise continued benefit accrual. 2.9 It was recognised by the Post Office that the Plan s current assets would remain in the Plan for the benefit of Plan members Fundamental to the Trustee s agreement to the benefit change, which reduced the value of the salary link on pre-2008 benefits as well as the value of future accrual, was the continuation of benefit accrual. This was the upside to counteract the downside of the benefit reductions. 10

11 2.11 The stakeholders who had to agree to the 2012 resolution: Government (and by extension, UK taxpayers), the businesses (RM and POL), the Plan Trustee, the recognised trade unions and the Commissioners of the EU, all gave their agreement on the basis that the assets left behind in the RMPP would be used for the benefit of members. The proposals currently being made by the Post Office seeks to unwind the agreement only 4 years later. The Post Office has not presented a convincing business case to unwind its agreement and we cannot conceive that the parties to the 2012 resolution would accept the proposal as a legitimate use of monies intended to provide member benefits. It may indeed be possible that using the assets to subsidise its business in this way re-opens the State Aid discussion. CWU POSITION 2.12 Assets left behind in the RMPP were meant to provide member benefits The CWU and its members agreed to swap one form of benefit accrual for another only on the basis that the assets released would be used to provide ongoing benefit accrual Members did not (and will not) agree to the released assets being used to subsidise the business s share of the costs of the Plan. THE CURRENT POSITION OF THE PLAN CONSISTENT WITH THE 2012 VALUATION 2.15 The commitment given in 2013 was that benefit accrual would continue in the RMPP while it could be funded by the contributions paid by the Post Office and the members together with an amount drawn down from the assets released by the reduction of the salary link. It is therefore important to track how quickly the assets released are being used up. The indicator used to track this is known as the projected crossover point the point at which all the assets released will have been used up The Trustee receives Quarterly Reports approximately updating the funding position of the Plan and assessing the crossover point Since the 2012 resolution, the cost of providing ongoing accrual of career average benefits has been significantly above the employer s contributions (17.1%) and the average smembers contributions (6.0%). This is because the investments backing the RMPP benefits are largely bond based and so are expected to produce a much lower rate of return than that expected when the current contributions were set back in the 2008 valuation. 11

12 2.18 The current cost of benefits is 44.9% (Q Quarterly Report) so the released assets need to pay for 44.9% 17.1% 6.0% = 21.8% of payroll. Pensionable pay in the 2012 valuation was 128m, which means approximately 28m of released assets are used each year ( 2.3m per month). The release of assets was worth 135m The actuarial basis is not described in the report, but we expect it follows the actuarial basis of the actuarial valuation of 31 March 2012, updated for market movements since the valuation date The Quarterly Report of Q (that is, as at 31 December 2015) shows: Technical provisions Assets Surplus 244.6m 370.9m 126.3m Funding ratio 151.6% Projected crossover point Late It is clear from the quarterly updates that nothing material has happened in the experience of the Plan since the 2012 valuation date to disturb the agreement between the Post Office, the Trustee, the recognised trade unions and members, that the assets released by the reduction to the salary link on pre-2008 benefits should be used to subsidise further benefit accrual for members The effect of a change of basis is another matter, a change of basis is not an item of scheme experience It should be noted that at the time of writing, the Post Office have announced job cuts of around 600 employees. We believe a large number of these employees will be RMPP members. Whilst the CWU will be fighting these job cuts, it should be noted that if they are made, the subsidy from the released assets will be needed on a lower payroll, so the crossover point will move further into the future We have sent a letter to the Trustee of the RMPP requesting draft 2015 valuation results on technical provisions, solvency and neutral bases, with descriptions of the actuarial bases. The letter also asked for information on the latest investment strategy including a copy of any new Statement of Investment Principles and a timeline for when any recent changes were discussed, agreed and implemented We have received a new Statement of Investment Principles, but we have not yet received a response to the actuarial questions. 1 This statistic comes from the Q3 report, a new date was not provided in the Q4 report on the technical provisions basis, although we note that the crossover point on the Gilts basis moved a little further into the future, from late 2020 to

13 INVESTMENT STRATEGY 2.26 The Trustee signed a new Statement of Investment Principles on 19 April A copy and a covering letter was sent to CWU on 22 April The new SIP adopted an asset allocation of: Date of Statement of Investment Principles April 2016 March 2014 Equities 3.0% 11.0% Property 5.0% 5.0% High yield credit 2.8% 5.5% Alternatives 7.5% 12.5% Investment grade credit 11.0% 11.0% Emerging market debt - 3.0% Liability hedging assets, derivatives and collateral 2.27 In the covering letter to the SIP, the Trustee wrote: 70.7% 52.0% the Trustee has an ongoing duty to monitor risk and its priority is to ensure the security of members benefits. The nature of the covenant is such that the current investment risk budget is effectively underwritten by existing POL assets, and the assets available to underwrite the investment risk budget diminish as members accrue benefits We understand from the Trustee that, in their opinion, the effect of this change on the crossover point will be relatively insignificant, perhaps moving it closer by around half a year. CWU POSITION 2.29 The current financial position of the Plan does not justify the proposal made to close the Post Office section in September The assets in the Plan are sufficient to allow accrual to continue at least until

14 3 ISSUES FOR THE TRUSTEE IS ALLOWING CLOSURE IN THE MEMBERS INTERESTS? 3.1 The Trust Deed and Rules does not have a clause or rule permitting an employer to terminate its liability to contribute. It does not have a clause or rule permitting an employer to terminate accrual. 3.2 Because the Trust Deed and Rules does not already have wording covering the situation of closure, it does not follow that closure to accrual results in members being given leavers benefits. The consequences of closing to accrual are also the subject of decision making. The default position must be no change, that is, closure to accrual does not bring an end to the remaining salary link on pre-2008 benefits. Closure to accrual should mean exactly that, accrual is ended, but otherwise benefits for service to closure date should be unaffected. 3.3 Similarly, closure to accrual does not necessarily mean the bringing to an end of the enhancements to benefits upon ill health retirement or redundancy. It is argued elsewhere that the Post Office has a contractual obligation to provide these enhancements. The Post Office has not started a consultation under employment law on the amendment of contracts to withdraw these enhancements. Until such time as the Post Office does run an employment law consultation, the Post Office cannot remove any contractual commitments. The RMPP is the means of delivering the contractual enhancements on ill health retirement and redundancy. The RMPP should not be amended to remove these items. 3.4 A particular issue for the Trustee is that at the time of writing, the Post Office has announced 600 redundancies. We believe many of the members will be entitled to redundancy enhancements. On the basis of (we believe incorrect) communications issued by the Post Office indicating that these enhancements are removed on the closure of the Plan, members are placed in an atrocious position of being told they are under threat of redundancy but that unless they go very quickly their redundancy benefits will be reduced. We believe the Trustee will want to consider carefully any reputational risks to it as well as closely examining their fiduciary duties if they are to be a party to placing members in such an impossible position. 3.5 If it were decided to terminate accrual, it would be wrong for the Trustee to make additional conscious changes to the rules to reduce members benefit expectations, such as: terminating the remaining salary link, removing the active rate of revaluation and replacing it with statutory revaluation, and terminating ill health and redundancy enhancements. It is the task of the Trustee to deliver the promised benefits, not to cut them. 14

15 USE OF RELEASED ASSETS 3.6 On the creation of the RMSPS and the Post Office section of the RMPP, assets were left behind in the POL section to fund the salary link. The rest of the assets were transferred to the RMSPS to provide pre-2012 benefits, with taxpayers taking on the deficit between the transferred assets and the pre-2012 liabilities. In effect, the RMPP s assets have been provided by taxpayers for the purpose of funding the salary link. 3.7 We have seen from the documents issued at the time, that all parties, the Post Office, Trustee, the CWU, Unite and their members, agreed that the premise of the 2014 benefit change was that part of the salary link on pre-2008 benefits would be given up and the assets released by this change would subsidise continued benefit accrual. It was recognised by the Post Office that the Plan s current assets would remain in the Plan for the benefit of Plan members. 3.8 Fundamental to the Trustee s agreement to the benefit change, which reduced the value of the salary link on pre-2008 benefits as well as the value of future accrual, was the continuation of benefit accrual. The Trustee stated that this was the upside to counteract the down side of the benefit reductions. 3.9 The Trustee must not break this deal so soon after it was struck. The assets released by the reduction in the salary link have not yet been fully used to subsidise further benefit accrual. The subsidisation of future accrual was the upside which enabled the Trustee to agree to the changes to the Plan. If accrual is terminated so soon after the deal, the Trustee s decision to agree to the changes is fatally undermined We have also seen that the experience of the Plan since the 2014 changes has not eroded the extent to which the released assets can subsidise the cost of benefit accrual. Any change of mind on the actuarial basis is not an item of experience Taxpayers provided the POL section with assets for the funding of member benefits in the form of the salary link, and members exchanged part of the salary link for continued accrual. This was intended to have a broadly neutral effect on total benefits. It would be wrong to appropriate taxpayers money given for the purpose of providing members with benefits for the different purpose of paying for a buy out of lesser benefits. The assets were provided for the provision of benefits, not for the purpose of subsidising a higher cost of insuring lesser benefits The agreement was that the Plan s current assets would remain in the Plan for the benefit of Plan members. The released assets must not be appropriated for a different party and/or a different purpose, such as subsidising the Post Office s desire to either insure the benefits or otherwise de-risk the Plan. It would be entirely wrong for the Trustee to break a deal by which assets were released to subsidise accrual for members in favour of devoting those assets to subsidising the Post Office s desire to terminate the Plan and wind it up, or to protect the Post Office from the risk of needing to pay future deficit contributions. 15

16 3.13 It was known from the report on the actuarial valuation as at 31 March 2012 that the surplus on a solvency basis would run down to zero before the surplus on the technical provisions basis runs down to zero. Page 5 of the valuation report projects a technical provisions funding level of 147% by 31 March The quarterly report for Q estimates an actual technical provisions funding level of 142.9% and a surplus of 112m. Page 6 of the valuation report projects a solvency surplus of 25m by 31 March The agreement to exchange the salary link for a continuation of accrual until such time as the technical provisions surplus ran out was made by the Post Office in the knowledge that the surplus on the solvency basis would run out at an earlier date. It is wrong for the Post Office to change its mind now and say it would rather make the decision on when to end accrual based on the solvency basis (or a near equivalent such as a gilts matching basis). It has already agreed to make the decision based on the technical provisions basis. Nothing has happened since the 2012 valuation which is materially out of line with the valuation s projections It is not appropriate that the released assets should be used to subsidise the cost to the Post Office of deciding to wind up the scheme. The Post Office should pay the cost of its own decision. If closure and wind up proceeds, the additional cost of insuring benefits should be paid by the Post Office, and the assets released by the reduction of the salary link and not yet used by subsidising further accrual should be identified and used to provide a partial reinstatement of the salary link, or other benefit for members Were the Trustee to agree to the closure to accrual, the Trustee must ensure that the decision to close does not bring other detriment to members: Revaluation rates must not be reduced to the statutory minimum for leavers. The members are not leaving service. The rules for the revaluation of members benefits must (at least) stay as they are. The Trustee must act to rectify the detriment to members from breaking the deal associated with the 2014 changes. This could be done by partially reinstating the salary link, for example. The premise of the 2014 deal was that salary link was reduced in favour of further benefit accrual. If the Trustee agrees not to provide that further benefit accrual after all, then the natural quid pro quo is to partially restore the salary link. 16

17 CONTINUING ACCRUAL VS SECURING EXISTING BENEFITS 3.16 There are only three scenarios for the future of a UK private sector defined benefit pension scheme: The scheme carries on, it is obliged by law to pay the benefits in full. The scheme is wound up voluntarily, it is obliged by law to insure the benefits in full, and the sponsoring employer is obliged by law to pay any difference between the insurance premium and the assets in the scheme. The sponsoring employer becomes insolvent, benefits are reduced to whatever amount can be insured using the assets (including any recovery of money from the insolvent employer), but the reduced benefits will not be less than Pension Protection Fund (PPF) compensation. The UK is obliged by EU directive to protect defined benefit pension property rights. The PPF is the implementation in UK law of this EU requirement The only scenario in which members benefits might not be paid in full is the scenario of employer insolvency Post Office Limited is adamant that it is not facing insolvency, in which case, members benefits in the RMPP MUST be paid in full, whether as they fall due from the RMPP, or by an insurance company if the benefits are insured For members, it is far from clear whether securing existing benefits to reduce the potential to fall into the PPF is preferable to continued accrual. Consider Mike, who features in the fourth retirement benefits illustration in the Facing the Pensions Challenge Further Details and Illustrations Guide: Mike is in Section B, he has 30 years service and a pensionable salary of 30,000. By 31 August 2016, he will have earned a pension of 11,300 a year. Of this, 9,600 a year pension has been transferred to the Royal Mail Statutory Pension Scheme. The RMSPS is provided by the Government, so all of this pension is safe regardless of whether POL becomes insolvent in future or not. 1,700 a year pension is provided by the RMPP. The proposition is for benefit accrual in the RMPP to end on 31 August 2016, and for this pension to be made more secure, either within the RMPP or by insuring it with an insurance company. What if, instead, benefit accrual continued for another year and in a year s time POL became insolvent? Not that we think that the POL becoming insolvent in a year s time is at all likely. 17

18 Over the coming year, Mike will earn another 375 a year of pension. If RPI exceeds CPI by 1%, say, the RMPP top up to the RMSPS pension would increase by about 82 a year. Mike would now have 2,157 a year pension in the RMPP. In the worst case scenario after POL s insolvency, the RMPP would transfer to the Pension Protection Fund, where the pension would be cut by 10%, to 1,941 a year. 1,941 a year secure pension from the PPF is more than 1,700 a year pension as at the proposed termination on 31 August The tiny DC pension which can be provided from 1 year s pension contributions would not make up much of the 241 a year difference. Annual pension increases in the PPF would be lower than in the RMPP if CPI exceeds 2.5% from time to time For Mike, continuing benefit accrual in the RMPP builds up more secure defined benefit pension for members even if Post Office Limited were to become insolvent than the alternative of terminating the RMPP now Of course all RMPP members will be different from each other. But they all have only post 2012 benefits in RMPP and so have only small amounts of benefit at risk. By contrast, as long service employees (having joined the Plan before it closed to new entrants on 31 March 2008) will have some pension benefits often significant amounts now held in RMSPS and so fully guaranteed by Government It is NOT in members interests to terminate accrual and use the remaining assets released by members to insure the Plan or further de-risk its investments. All this does is minimise the members defined benefits. The benefit gain from further accrual outweighs the potential loss were the Post Office to become insolvent and the benefits reduced to PPF compensation amounts. 18

19 IS A BUY-OUT MORE SECURE? 3.23 A buy-out is as secure as the insurance company the buy-out is placed with. Insurance company failure is rare, but the possibility cannot be entirely ruled out Post Office Limited is wholly owned by Government. Three questions arise were POL to become insolvent: Would the Government volunteer to support the POL section of the RMPP? Probably not. Would the Government be obliged to support the RMPP by public pressure? Quite possibly. Could the Government be compelled to support the RMPP by the Pensions Regulator? Yes, TPR has powers to impose a Contribution Notice (CN) and/or a Financial Support Direction (FSD). If TPR can find a reason to impose a CN or FSD on the owner of POL upon POL s insolvency, then the RMPP would be in an extremely good position The effect of public pressure on the Government should not be underestimated The Trustee should take great care not to undervalue the potential for Government support of the Plan. The financial strength of the Government is superior to the financial strength of an insurer. Moving away from a position which has the potential for Government support should not be done lightly. CWU POSITION 3.27 The Trustee should only agree to change the Plan s rules to allow closure if this is demonstrably in the members best interests. This has not been proven If a change to the rules were agreed by the Trustee, the change must not reduce the current level of member benefits (currently funded at over 150%) If accrual does not continue, members must be recompensed for the final salary link they gave up on the understanding that the assets would be used to fund future accrual. 19

20 4 LEGAL ISSUES ILL HEALTH AND REDUNDANCY BENEFITS Background 4.1 As a result of the Postal Services Act 2011, Post Office Limited moved from being a subsidiary of Royal Mail Group Ltd (RMG) to being a subsidiary of the parent company, Royal Mail Holdings PLC from 1st April Employees working for the Post Office s operations transferred employment under Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) from RMG to being directly employed by POL. 4.2 The TUPE Regulations preserve employees terms and conditions when a business or undertaking, or part of one, is transferred to a new employer. Employees continuity of employment is preserved, as are their terms and conditions of employment under their contracts of employment, including any Collective Agreements which may have been in place. 4.3 A National Agreement is in place between Post Office Limited, RMG and CWU which confirms that all employees pay, terms and conditions as determined by current collective agreements and policies are protected and transferred to POL in accordance with TUPE. Post Office Limited also guaranteed that all current Collective Agreements in place with CWU were transferred. Two of the agreements listed in the schedule to the National Agreement are: The Ill Health Retirement Agreement of 1 May 2009, and The Managing the Surplus Framework (MTSF) of October The parts of these agreements referred to below are included in Appendix B. Redundancy 4.4 MTSF set out the joint approach of the CWU and RMG to the management of Surplus Employees and redundancies in respect of all permanent Administrative and Operational Grades. 4.5 Under MTSF Appendix 6, a member of the RMPP has a contractual entitlement to a service credit in the event of redundancy over age 55 of up to 37.5% of the Reckonable Service which could have been attained if service had continued to If the Post Office s proposal to cease accrual in the POL section of RMPP from 31 August 2016 goes ahead, CWU believe that members will still be entitled to these terms, which exist contractually outside of the rules of the RMPP. 20

21 4.7 Therefore the Post Office must provide a defined benefit in respect of the service credit upon redundancy, even after accrual in the RMPP is ended (if it is, after consultation). The easiest way to achieve this is to retain the redundancy rules within the RMPP. 4.8 Turning to the pension consultation, neither of the Facing the Pension Challenge booklets, Summary Guide and Further Details and Illustrations Guide, even mention the word redundancy so far as we can see. The withdrawal of the redundancy benefit from the RMPP has not been explicitly proposed in these documents. Members cannot be expected to infer from loose references to becoming a deferred member that the special terms on redundancy are to be withdrawn. A clarification in FAQs is insufficient for the Post Office to say that a withdrawal of the redundancy benefit has been proposed. Therefore it is argued that the redundancy benefit should not be withdrawn after this consultation is concluded because its withdrawal has not been properly proposed. Ill Health Early Retirement 4.9 The Joint Agreement of 1 May 2009 deals with employees who may be unable to continue to undertake their normal duties due to ill health Under item 12.2, a member of the RMPP has a contractual entitlement to a service credit in the event of ill health retirement of the biggest of: 6 2/3 years A credit which will increase total service to 20 years 75% of the time remaining to age If the Post Office s proposal to cease accrual in the POL section of the RMPP from 31 August 2016 goes ahead, CWU believe that members will still be entitled to these terms, which exist contractually outside of the rules of the RMPP Therefore the Post Office must provide a defined benefit in respect of the service credit upon ill health retirement, even after accrual in the RMPP is ended (if it is, after consultation). The easiest way to achieve this is to retain the ill health service credit provision within the RMPP Turning to the pension consultation, the Facing the Pension Challenge booklets, Summary Guide and Further Details and Illustrations Guide, make very little mention of ill health retirement benefits. The only reference to ill health retirement we have found is on page 5 of the Further Details and Illustrations Guide, which refers to ill health retirement in accordance with the rules for deferred members. The withdrawal of the ill health retirement benefit of active members has not been explicitly proposed in these documents. Members cannot be expected to infer from loose references to becoming a deferred member that the special terms are to be withdrawn. A clarification in FAQs is insufficient for the Post Office to say that a withdrawal has been proposed. Therefore it is argued that the ill health retirement 21

22 terms should not be withdrawn after this consultation is concluded because its withdrawal has not been properly proposed. NOMINAL SALARY CROWN OFFICE STAFF ONLY 4.14 This is an extract from the pay offer letter of 20 November 2007, on the subject of a Nominal Salary for pensionable purposes. The full letter is included in Appendix B. With effect from April 09 the creation of a nominal salary for pensionable purposes that is 6.7% higher than base salary. This salary would be used to calculate final salary payments on retirement, should there be changes to the pension scheme following the consultation exercise, the 6.7% benefit would also apply in all circumstances going forward. Members who choose to accept this option would be required to make employee pension contributions at the normal rate but based on this higher nominal salary The quoted paragraph applies to Postal Officers in Crown Offices. The section in the letter for Deputy BMs who move to PO salary refers to the arrangements for nominal pensionable salary for Postal Officers. RAs option is for a nominal salary for pensionable purposes which is 1.2% higher than base salary, rather than 6.7%. RAs on max option is for a nominal salary for pensionable purposes which is 3.3% higher than base salary It should also be noted that it is clear that the nominal salary would continue in all circumstances going forward. The option for members to contribute on a 6.7% higher nominal salary (or 1.2% or 3.3% according to role) and to receive benefits or employer DC contributions should continue, whether future accrual is in the defined benefit Plan or future contributions are made to the DC scheme. There is no reason why the maintenance of the Notional Salary option should depend upon the type of scheme offered. All circumstances means exactly that, it does not mean in circumstances of a DB scheme but not in a DC scheme The CWU has on a number of occasions asked for confirmation that benefits have continued to be calculated on this uplifted salary. To date, the Post Office has been unable to provide this confirmation. This point is included in this body of evidence as it is an important issue which has not been addressed during the consultation process. CWU POSITION 4.18 Contractual benefit entitlements are not removed by a change to a pension scheme. If these benefits are not provided through RMPP, they must be provided using some alternative mechanism. 22

23 5 QUALITY OF CONSULTATION 5.1 The CWU has serious concerns about the way in which consultation on Plan closure has been conducted. Our concerns cover a number of areas: The consultation appears to be a tick box exercise only with key decisions having been made already. There has been no employment consultation on contractual changes Members have been given misleading information throughout the consultation, particularly on the security of their benefits. PREDETERMINED OUTCOME 5.2 As noted earlier, there are sufficient released assets in the Plan to support the cost of continued benefit accrual until late 2022 per the Q quarterly update (a later date still can be inferred from the Q update). 5.3 The released assets exist because the members gave up the linkage of pre-2012 benefits to final salary, instead accepting a reduced linkage to RPI and pay rises from specified kinds of promotion. 5.4 While it is clear that the high cost of the scheme which has been created by the investment and funding strategy in the 2012 valuation cannot be sustained ad infinitum, the cost (as calculated in the Q update) can be sustained for a while yet. 5.5 It is important to note that the CWU has recognised that the Post Office cannot afford to pay contributions in the region of 40% to the Plan. This is why the solution from 2014 was accepted as a way of keeping the cost of the Plan affordable. In internal discussions before this consultation commenced, the CWU signalled its willingness to discuss a sustainable pension scheme, to be introduced once the assets released by members has been utilised. The Post Office would not agree to a pause in its planning schedule aiming for closure in The Post Office has been relatively open about its rush to close the Plan before a full exploration of alternative approaches had been undertaken with members. They have indicated that unless the Plan was closed very quickly, they would lose the opportunity to insure the benefits (using the money left in the Plan by Government) and so protect their balance sheet. As we have previously indicated, we see no clear benefit for our members in doing this. 23

24 5.7 The consultation period should have provided the opportunity for these issues to be explored and debated but as the Post Office had already made their decision, there was no rational comparison undertaken of the alternatives. In fact, the opposite was the case the communications issued by the Post Office were focussed entirely on the advantages of buy out to an extent which has skewed communications and undermined the consultation process. 5.8 An indication of the level of the Post Office s pre-judgment of the outcome of the consultation is that it has already commissioned a feasibility study into its options for buy in and buy out of RMPP benefits for its members assuming the closure goes ahead. 5.9 It should also be noted that while undertaking the consultation, the Post Office has not sought to agree or advance the actuarial valuation as at 31 March 2015 with the Trustee. This valuation has a statutory deadline of 30 June 2016 but we understand that to date the Post Office has failed to engage with the Trustee on setting assumptions or discussing contributions. Until any change is made, the Plan should continue under its current structure and the failure of the Post Office to recognise this again indicates its assumption that it will get its way whatever comes out of the consultation In addition it should be noted that during the consultation exercise, the Post Office engaged with the Trustee to change the investment strategy of the Plan. This change meant a further de-risking of the Plan s assets a change which seems strikingly in tune with its intentions should the changes it has proposed be made. Again, this implies a clear pre-judgment of the outcome of the consultation. CONTRACTUAL BENEFITS 5.11 The consultation is especially defective because the matter of contractual rights to special benefits on ill health and redundancy has not been dealt with at all. A concurrent employment law consultation on the withdrawal of these rights has not been conducted. The pension consultation has not specifically addressed these contractual rights. No proposition for the provision of these rights after the closure of the Plan (if it is closed) has been put forward The pension consultation proposal documents, Facing the Pension Challenge, Summary Guide and further Details and Illustrations Guide, do not explicitly explain any proposition to withdraw the special benefits on ill health and redundancy. Members cannot be expected to infer the withdrawal of these benefits from loose references to being treated as a deferred member. These changes have not been formally proposed and cannot be made after this consultation. 24

25 SECURITY OF MEMBERS BENEFITS 5.13 A central theme of the Post Office s representations is that an objective of the closure of the Plan is to raise the security of members benefits Earlier in this report, we have outlined the three scenarios for the future of a UK private sector defined benefit pension scheme: The scheme carries on, it is obliged by law to pay the benefits in full. The scheme is wound up voluntarily, it is obliged by law to insure the benefits in full. The sponsoring employer becomes insolvent, benefits are reduced to whatever amount can be insured using the assets (including any recovery of money from the insolvent employer), but the reduced benefits will not be less than Pension Protection Fund (PPF) compensation The only scenario in which members benefits might not be paid in full is the scenario of employer insolvency. Post Office Limited is adamant that it is not facing insolvency, in which case, members benefits in the RMPP MUST be paid in full, whether as they fall due from the RMPP, or by an insurance company if the benefits are insured. The benefits are secure We have also explained earlier in this report that members gain greater security from continued accrual than they gain from termination of accrual and insurance. And a defined benefit is more reliable than the highly uncertain outcome from a defined contribution scheme. Switching to DC does not improve benefit reliability, it worsens it The message put forward by the Post Office in the consultation is that members benefits are currently insecure in some way, and that early termination of accrual and insurance of their benefits would improve their position. This is not just a vague hint that benefits may be insecure. In Facing the Pension Challenge Summary Guide, in the section on the Need for Change, there are 15 references to risk, protection and security. In the FAQs there are 32 more references to risk, protection and security. The whole thrust of the communications has been to scare members into believing their benefits are insecure As we have previously argued, this is not so. We have time after time drawn the attention of the Post Office to the fact that members have been alarmed by the messages and have asked the Post Office to issue corrections explaining the full issues behind security. They have failed to do this. 25

26 LACK OF AN ALTERNATIVE IN THE POST OFFICE S PROPOSALS 5.19 Neither of the Facing the Pension Challenge booklets, Summary Guide and Further Details and Illustrations Guide, discuss any alternatives which the Post Office may have considered. The omission of a discussion of alternatives is a serious weakness in the proposal put to members. It does not help members respond to the consultation effectively if alternatives are not put before them. It implies a prior decision that closure is the only way to go There is a reference to alternative options considered within the FAQs: A contribution sharing scheme. Hybrid DB and DC, change to retirement age, change of accrual rate It is clear from the Post Office s comments on each of the options that they took it for granted that any defined benefit scheme would be invested in assets of low return, which has the direct consequence that the cost of providing benefits is very high. It is not disputed that providing defined benefits from a scheme invested in low return assets is impractically expensive. The need to find an alternative to the current approach (from the technical provisions crossover point in 2018 or thereabouts) is not disputed All the options the Post Office considered, other than DC, assumed continuance of the current approach to providing defined benefits. Changing the quantum of the defined benefit does not solve the problem of the high cost of provision per 1 of pension provided. The current approach is expensive per 1 of pension provided whether the accrual rate is 1/60 or 1/ It is clear is that the Post Office has not considered any alternatives to the current approach to providing defined benefits other than the proposed switch to defined contribution. ALTERNATIVE PROPOSALS 5.24 Greater pension productivity is good for everyone: it is good for members, who can have bigger pensions for given contributions, and good for employers, who can provide an attractive pension scheme at an affordable cost For a defined benefit pension scheme to be invested largely in bonds destroys its cost efficiency relative to defined contribution, a DC scheme would at least be invested in productive assets pre-retirement until retirement approaches. A DC scheme would be expected to provide a bigger benefit for the same contribution than a bond invested DB scheme. It is better to find a way to run a DB scheme with investments in growth assets than to run a DB scheme with investments in bonds. 26

27 5.26 Looking away from the RMPP and starting with a clean sheet, a scheme might be built on the following principles. Employer s Contribution Rate 5.27 The members contribution rate is 6% and the employer s contribution rate is fixed at 17.1%. For there to be next to no reliance on the employer s covenant, and for the employer to be confident that it is unlikely to be required to contribute at a higher rate, the scheme design needs to be such that it can be delivered within this contribution rate. Investment Strategy 5.28 For cost efficiency, the investment strategy is a diversified portfolio of growth assets. For a defined benefit scheme to have a useful purpose, it needs to be more cost efficient than a DC scheme. Benefit Design 5.29 The task is to design a defined benefit structure such that, for the 23.1% contribution rate, the scheme is self-sufficient while invested in growth assets The term self-sufficiency is usually used to mean self-sufficiency while invested in gilts. But there is no need to make the assumption that the self-sufficiency must be in gilts The quantity of assets required to be self-sufficient in growth assets is different from the quantity of assets required to be self-sufficient in gilts. It is not found by looking at gilt yields, rather, the variability of performance of the growth assets markets needs to be studied Much work has been done in recent years on Collective Defined Contribution schemes and Defined Ambition schemes. Notwithstanding that the last Government s legislation on these has not been completed by this Government, there are many ideas which can be borrowed for use in a defined benefit scheme to make it manageable within a fixed contribution budget The principle is to provide a smaller defined benefit which can be safely provided from the fixed contribution rate and the growth investments. Discretionary additions to the smaller defined benefit are made as can be afforded from time to time. Given the objective for the employer s contribution rate is that it is fixed, then it is right that members benefits are improved or worsened according to what can be afforded from time to time. 27

28 The RMPP 5.34 The pre-2012 liabilities of the Royal Mail Pension Plan have been transferred to the Royal Mail Statutory Pension Scheme. The RMPP contains only 4 years of benefit accrual since then, it has little liability to deferred and pensioner members, and the only historic liability it now has is the salary link on pre-2008 benefits. In effect, the RMPP has barely started. It would be possible for the RMPP to be modified on the lines outlined above and for the existing small defined benefit liability to be provided within the modified scheme, without upsetting the premise of providing benefits within a fixed contribution budget. With the passage of time and the payment of contributions, the relative significance of the initial 6 years of accrual (assuming closure in 2018) declines. Alternatively, the new design could be set up in a new scheme We propose the next 22 months are spent developing a new design within these parameters, which could be implemented from April 2018 if continued accrual in the Plan cannot be continued beyond then. CWU POSITION 5.36 The Post Office has failed to engage in a meaningful consultation with Plan members. The Post Office has failed to consider realistic alternatives to switching to DC. Their actions indicate that their only intention is to close the Plan and, if possible, use members money to fund a buy out As no meaningful consultation has taken place, the membership, Trustee and the Pensions Regulator must all oppose the Plan s closure. 28

29 6 EFFECT ON MEMBERS BENEFIT ILLUSTRATIONS 6.1 The booklet Facing the pension challenge issued by the Post Office contains four worked examples of what the pension changes proposed by the Post Office could mean upon retirement at 65. We have developed one of the four examples (Pat s) to show what the pension changes could mean upon early retirement, ill health retirement and redundancy. Pat, a 45 year old section C member 6.2 Pat is 45 years old and joined the Post Office on 31 August He is a Section C member. His defined benefit pensionable salary at 31 August 2016 is 21,400 a year and his basic salary is 25,000 a year. He chooses to pay 4% of basic salary to the POL DC Plan from 1 September The following graph illustrates the pension Pat could expect to receive under the current scheme and how this could be affected if the proposals go ahead. It is highly likely that many members will not work for POL until they are 65, so we show some examples of what Pat could expect if he retires before then. 6.4 For full details of POL s figures for retirement at 65, see pages 12 and 13, and also pages 20 to 22, of the Facing the pension challenge booklet. The other figures were prepared by First Actuarial. 6.5 The reductions in benefits for future service are severe in all circumstances. 29

30 MEMBERS REACTION 6.6 CWU members immediate reaction to the Post Office plan to close the DB scheme was one of total opposition. This was a consistent reaction from across all work areas coupled with this was an exceptionally strong feeling of being let down by the Post Office. The position of opposition is as strong today as it was at the commencement of the consultation and this position has been fuelled further by the provision of the personalised illustrations in respect of the impact that closing the scheme down would have on the individual. Without any fear of contradiction CWU members fundamentally believed the Post Office is operating in regard to pensions in a way that is detrimental to them as individuals as well as the membership overall as a collective. There is a genuinely held belief that senior directors are acting in a way that is specifically designed to reduce costs off the balance sheet by saving pension contributions. Equally, CWU members believe that the Post Office are being opportunistic and are ignoring the strongly held views that the DB scheme should not close in the foreseeable future. The overwhelming view is that the significant and unprecedented job losses associated with the Crown Franchising Programme, Financial Specialists and the Future of Supply Chain should be completed before any attempt to close the scheme down. This position is all the more relevant when taking into account the high level of employees in the DB scheme that are either approaching 55 this year or who are currently aged 55 and over. It is strongly perceived by those in the age group category that the Post Office are acting in a way that is designed to impact negatively on a redundancy package that hitherto would have been contractual via the Managing The Surplus Framework Agreement (MTSF). 6.7 The Union conducted a consultative ballot of all members including those currently in the Defined Contribution Scheme or not in the scheme as yet in regards to the Post Office proposal to close the DB scheme and replace it with a revised DC scheme. This membership engagement was conducted on the basis of an individual members ballot sent to home addresses and overseen by independent scrutineers. The ballot papers were despatched on Friday 18 th March and the ballot closed on Friday 1 st April. The question on the ballot paper was as follows: Do you support the key Union policy to keep open the Defined Benefit scheme to existing members whilst also securing an improved Defined Contribution scheme for current DC scheme members? 30

31 The result of the ballot was an amazing 99.6% (1,575 votes) in favour of the Union policy to retain the DB scheme and to improve the current DC scheme. Only six no votes were returned in opposition to this policy. The turnout was 44% which was considered to be high as the ballot was not restricted to just DB scheme members. As a consequence of the 99.6% decision, Andy Furey, Assistant Secretary, wrote to Paula Vennells, Chief Executive, on 1 st April (on the same date the scrutineers declared the ballot result) advising her of the overwhelming decision of her employees who were represented by the CWU. In this correspondence the Union called upon Paula Vennells to: Immediately abandon the plan to close the DB scheme Enter into meaningful negotiations with the aim of improving the DC scheme for existing members Disappointingly Paula Vennells, Chief Executive, saw fit to ignore the democratic decision of the CWU members and didn t even respond to the letter even though a response was invited. This would seemingly further indicate that the Post Office has made up its mind to close the DB scheme and in doing so is prepared to totally ignore and dismiss the views of its employees. Associated at Appendix C are Union communications to members regarding the consultative ballot and the formal letter to Paula Vennells referred to above. 6.8 CWU members have regularly commented on the Post Office s proposals, on various social media (closed Facebook pages for CWU members only) in an extremely hostile way. Indeed it is fair to say that CWU members are exceptionally angry with the way the Post Office is treating them in respect of their pension and wellbeing in retirement. An illustration of this anger is as follows (we have anonymised this to protect the individual s identity): To whom it may concern, I'd like to voice my fears, my anger, my utter consternation at the proposal offered for the current pension scheme. I have read the 'glossy' booklet with all the happy smiley photos on most pages giving the impression that we were 'blessed' and 'lucky' to be offered these changes. Stating that we would contribute to our own 'pot' and be able to steer our own pension future. I've listened in to the calls but garnered nothing from them after all the noncommittal responses. But the straw that broke me was when I received the personal forecast detailing that I would (expectedly) have an annual pension reduced by approximately 7000 at best and 9000 at worst. HOW IS THAT SUPPOSED TO MAKE ME FEEL LUCKY OR BLESSED. It's one thing to attack the crown network saying its 'to secure the future' but totally another to undermine and aim to destroy my own!!!!!! I have given over 25 years to this company but I am now ashamed to say I work for a company that shows such utter disregard for its workforce. Please forward this up the chain to 31

32 those who matter so that my insignificant little voice is heard saying I TOTALLY REJECT THE PROPOSED PENSION CHANGES. Thank you 6.9 At its Annual Conference 2016, the CWU debated the Emergency Motion attached as part of Appendix C. This Emergency Motion was carried unanimously by the Conference delegates CWU members fully support the Union s position as laid out in this Body of Evidence and as such urges the Post Office to delay any closure of the DB scheme until at least April

33 7 THE BUSINESS CASE 7.1 The CWU of course wants a vibrant, profitable Post Office as that is best for its members jobs. It is also best for its members pensions. 7.2 Reasons advanced by the Post Office in support of its proposal include: The cost to Post Office of building up future DB pensions is not sustainable. Currently we pay around 17m each year into the POL DB Plan but this does not cover the full cost to Post Office of providing members benefits. The balance of this cost is being met from the current surplus of funds in the POL DB Plan. However, once the surplus is exhausted we would face a significant increase in our DB pension costs, making it unaffordable to continue building up future DB pensions. We remain exposed to the risk that any additional investment could prove inadequate. For example, if economic conditions deteriorate further or members live longer than expected, there is no guarantee that Post Office will be able to meet any additional costs which arise. These significant and growing costs put the security of your benefits built up since April 2012 at risk. Our concern is that it potentially puts your pension benefits at risk, and could also threaten the viability of our business in the longer term. We have to make decisions so we don t reach a point in the future when we cannot afford to fund the DB plan. By taking action now we can put the POL DB Plan on a more secure footing and take action to de-risk so as to provide greater security This would cost money, which is why we believe we should take these steps now while the assets are expected to be sufficient to cover the costs of doing so. 7.3 It is recognised that the future cost of Plan pension accrual is unsustainable beyond the crossover point at which the assets released by the reduction in the salary link have been spent on the subsidisation of future accrual. That point has not yet been reached. The crossover point was originally expected to be in 2018 and the experience of the Plan since the 2014 changes has put the crossover point further into the future, not brought it nearer. 7.4 The Plan s funding has not deteriorated faster than expected since the 2014 changes were made. No case has been made that the actuarial basis of funding in the calculation of the assets left in the scheme after the transfer of pre-2012 liabilities to the RMSPS is inadequate to provide for the members benefits from a continuing scheme. The experience so far is that it is adequate. 33

34 7.5 It was known from the 2012 actuarial valuation that the crossover point on the solvency basis would occur before the crossover point on the technical provisions basis. The agreement to judge the crossover point on the technical provisions basis was made with this knowledge. The Post Office should not be allowed to switch attention to the solvency basis (or a near equivalent such as a gilts matching basis) now. 7.6 Security of members benefits is better served by continued accrual. It is an odd approach to the improvement of benefit security which terminates DB accrual in favour of DC, because DC provides highly uncertain benefit outcomes. It is an odd approach to the improvement of benefit security which reduces members defined benefit expectations. 7.7 The statement that This would cost money, which is why we believe we should take these steps now while the assets are expected to be sufficient to cover the costs of doing so is a remarkable confession. It is a direct admission that what the Post Office is seeking to do is to redirect assets left in the Plan by the Government for the provision of benefits to members into a subsidy of the greater cost of de-risking or insuring benefits. Rather than meet the cost of its de-risking objectives itself, the Post Office is, in effect, seeking to obtain a form of State Aid. The assets it is seeking to use derive from Government support, and were not provided for the purpose of subsidising de-risking measures redundancies have the potential to affect the planning of the RMPP. On the one hand, there will be fewer active members accruing benefits in future requiring subsidy from the released assets. On the other hand, some of the redundant members may meet the criteria for pension enhancements. It is not clear what the overall outcome of these effects is, there is a cost saving from one and a cost increase from the other. 7.9 The case for closure to accrual in September 2016 has not been made. We propose that benefit accrual continues in the existing design until at least April 2018, as originally envisaged It is recognised that the cost of the Plan is unsustainable once the assets left in the Plan by Government for the provision of benefits have been spent on the provision of benefits. We propose the next 22 months are spent developing new pension arrangements, which could be implemented from April 2018 if continued accrual in the Plan cannot be continued beyond then. 34

35 APPENDIX A: DOCUMENTS RELATING TO THE 2014 BENEFIT CHANGE Safeguarding your pension The Company s pension proposal Our pension proposal covering letter Safeguarding your pension The Company s decision Your pension proposal Our decision covering letter Letter from RMPP Trustee to members, October

36 SAFEGUARDING YOUR PENSION THE COMPANY S PENSION PROPOSAL Page 3 36

37 Excerpt from page 4 Excerpt from page 5 37

38 YOUR PENSION PROPOSAL OUR DECISION - COVERING LETTER 38

39 LETTER FROM RMPP TRUSTEE TO MEMBERS, OCTOBER

40 40

41 41

42 APPENDIX B: COLLECTIVE AGREEMENTS The Ill Health Retirement Agreement of 1 May 2009 The Managing the Surplus Framework (MTSF) of October 2010 Pay agreement of

43 THE ILL HEALTH RETIREMENT AGREEMENT OF 1 MAY ILL HEALTH RETIREMENT BENEFITS General References to normal retirement age below mean normal retirement age for pension purposes Retirement on Ill Health Grounds with Immediate Pension Active members of the Royal Mail Pension Plan with 5 years service or more and at least two years qualifying service in the Pension Plan meeting the criteria for retirement on illhealth grounds will have their pension based on their full benefits calculated up to their last day of service plus 75% of future pensionable service up to normal retirement age. In addition, the 75% projection of prospective service will apply equally to the widow(er) s and children s pensions payable in the event of death in service of an employee in accordance with the provisions outlined above. Alternatively for active members with more than 10 years service, if it gives higher benefits, the enhancement will be to 20 years service, or by an additional six and two thirds years or up to normal retirement age if earlier. For active members with between 5 and 10 years service, enhancement will be to double service or up to normal retirement age if sooner and if this gives higher benefits. Members with over 2 but less than 5 years reckonable service will receive a pension based on their full benefits calculated up to their last day of service. Employees must be active members of the Royal Mail Pension Plan (RMPP) to receive an immediate pension under these provisions. Where an employee meets the criteria for Medical Retirement due to permanent incapacity but is not a member of the RMPP, then they will be eligible to the benefits applicable for Retirement on Ill Health Grounds with Lump Sum Payment, or if eligible and more beneficial a benefit from the discretionary company insurance scheme. 43

44 THE MANAGING THE SURPLUS FRAMEWORK (MTSF) OF OCTOBER 2010 Excerpt from Appendix 6 of MTSF 44

45 45

46 Mr A Furey Assistant Secretary Communication Workers Union 150 The Broadway LONDON SW19 1RX November 20 th 2007 Dear Andy removes the distinction between CSA and PO/RA grades but also means that those employees in the affected grades receive a consolidated pay increase in April 08 rather than having to wait until April 09 as originally planned. The next formal pay review after the changes outlined in this offer will be 1 st April 2010 The introduction of the 35 hour week for provincial branches and the proposal to run with a nominal pensionable salary mitigates the impact of the marked time on both pay and pension in comparison with our previous offer. I have outlined the key elements of the offer for each of the affected grades: Re: Post Office Ltd, CWU 2007 Pay offer for Crown Office Employees Without Prejudice Postal Officers Further to our recent meetings I am writing to formally confirm the details of the revised Crown Office pay offer as we discussed. This information is provided without prejudice to both parties and hopefully will form the basis of the pay deal. Our proposal addresses the following grades in Post Office Ltd, represented by the CWU: Deputy BMs POs RAs CSAs We have constructed a 3 year pay offer, which runs until March 31 st 2010 which both meets our aspiration to move to one grade for Counter Colleagues and one grade for Retail Colleagues and A lump sum payment of 1000 paid in lieu of a consolidated pay rise for 07/08. This payment will be pro rata for part time employees based on actual hours worked in the previous 12 months. The lump sum payment will be made as soon as possible after the pay ballot is concluded. If preferred colleagues can choose for this lump sum and the other lump sums on offer to be paid over a12 month period. Equalisation of London Weighting with RML with effect from 1 st July 2007 and with any further increases necessary to maintain parity in the future. Reduction of the working week to 35 hours for provincial employees with effect from 7 th January 08. You accept the principle that as much of the work as possible should be absorbed and this change will form part of a major rescheduling exercise to accommodate other changes within the branch network which we will work together to implement. This reduction is equivalent to 46

47 an increase in the hourly rate of 2.86%. I can confirm that part time individuals will not have their contracted hours reduced to absorb the hour. Consolidated salary increase of 3.0% in April 08 resulting in a new pay rate for full time POs of This increase will not flow through to the Saturday premium payment. London weighting will retain parity with Royal Mail Letters. The 3% increase will apply to all other allowances including the Scottish Islands Allowances. A lump sum payment of 95 in lieu of 0.5% pay increase, this payment will be pro rata for part time employees based on actual hours worked in the previous 12 months. A further lump sum payment of 1000 paid in April 09 in lieu of a consolidated pay rise for 09/10. This payment will be pro rata for part time employees based on actual hours worked in the previous 12 months. With effect from April 09 the creation of a nominal salary for pensionable purposes that is 6.7% higher than base salary. This salary would be used to calculate final salary payments on retirement, should there be changes to the pension scheme following the consultation exercise, the 6.7% benefit would also apply in all circumstances going forward. Members who choose to accept this option would be required to make employee pension contributions at the normal rate but based on this higher nominal salary. To compensate for the withdrawal of Saturday premium in April 09 a lump sum payment of 3.5x actual Saturday Premium earnings for 08/09 will be paid in April 09. The Saturday premium earnings will be used in the calculation of all contractual holiday pay during the financial year 08/09. For employees who are on maternity leave or absent due to long term ill health the DBM Saturday premium earnings in the 12 months immediately prior to the period of absence will be used to calculate the payments. Saturday premium payments will continue until end March The new job title will be Customer Service Consultant (Advanced level). We are willing to consider joint consultation on this name however we need to agree on some credible choices that reflect the change in role and the increased focus on customers. A lump sum payment of 3870 to move to PO salary when the offer is agreed. If the above buy down option is chosen then all other arrangements for PO with regard to lump sums, pay increases and eligibility for the nominal pensionable salary as outlined above. The new job title will be Advanced Customer Service Consultant see previous comments with reference to the name change. Movement to the PO grade as outlined above is optional; for DBM s who choose not to take this option they will remain on their current pay rate ( 19868) and receive lump sums of 1000 in October 07, 700 in April 08, 1000 in April 09. They will continue to receive lump sums in lieu of consolidated increases in future pay deals until their pay is equalised with the advanced level Customer Service Consultant. I can confirm that removal of the Saturday premium and the change to the working week for DBM s will be in line with the arrangements for POs as outlined above regardless of whether they choose to accept the buy down to the PO grade. 47

48 CSA A consolidated pay increase of 6.7% for level 6 CSA from 1 st October For other CSA grades their pay will be aligned to the Career Path as outlined in the Guide to the Pay Offer document and detailed at the end of the letter. Equalisation of London Weighting with RML with effect from 1 st July 07 and with any further increases necessary to maintain parity in the future. Reduction of the working week to 35 hours for provincial employees with effect from 7 th January 08. You accept the principle that as much of the work as possible should be absorbed and this change will form part of a major rescheduling exercise to accommodate other changes within the branch network which we will work together to implement. This reduction is equivalent to an increase in the hourly rate of 2.86%. I can confirm that part time individuals will not have their contracted hours reduced to absorb the hour. The advanced level of the Career Path for the Customer Service Consultant will increase to with effect from 1 st April 08. A consolidated pay increase of 3.5% in April 09. At this point the pay rate for the advanced Customer Service Consultant will be Removal of the hot spot allowance from the branches currently eligible. This allowance will cease with immediate effect for the recruitment of new joiners as the higher entry rate mitigates the requirement for the allowance. For existing employees in branches that are remaining in the Crown office network the allowance will RAs (on mid) cease on 31 st March 2008 and they will receive a lump sum payment of This payment which equates to a buy out of 3x will be pro-rata for part timers based on actual hours worked in the preceding 12 months. For those employees in branches that are transferring to WHS during 2008 they will continue to receive the allowance until the time they transfer, there will be no lump sum buyout unless they are remaining in employment with Post office Limited. The new job title will be Customer Service Consultant or Retail Sales Consultant. We are willing to consider joint consultation on this name however we need to agree on some credible choices that reflect the change in role and the increased focus on customers. Dependent on performance and current pay levels colleagues can progress to either Competent or Advanced Customer Service Consultant. From 1 st October 2007 a consolidated pay rise of 5.5% - 15,000 until April 09 A lump sum payment covering 18 months of 1.2% paid this year Equalisation of London Weighting with RML with effect from 1 st July 07 and with any further increases necessary to maintain parity in the future. Reduction of the working week to 35 hours for provincial employees with effect from 7 th January 08. You accept the principle that as much of the work as possible should be absorbed and this change will form part of a major rescheduling exercise to accommodate other 48

49 changes within the branch network which we will work together to implement. This reduction is equivalent to an increase in the hourly rate of 2.86%. I can confirm that part time individuals will not have their contracted hours reduced to absorb the hour. A consolidated pay increase of 3.5% in April 09. With effect from April 09 the creation of a nominal salary for pensionable purposes that is 1.2 % higher than base salary. This salary would be used to calculate final salary payments on retirement, should there be changes to the pension scheme following the consultation exercise, the 1.2 % benefit would also apply in all circumstances going forward. Members who choose to accept this option would be required to make employee pension contributions at the normal rate but based on this higher nominal salary. A lump sum payment of 3.3% for 18 months paid this year Equalisation of London Weighting with RML with effect from 1 st July 07 and with any further increases necessary to maintain parity in the future. Reduction of the working week to 35 hours for provincial employees with effect from 7 th January 08. You accept the principle that as much of the work as possible should be absorbed and this change will form part of a major rescheduling exercise to accommodate other changes within the branch network which we will work together to implement. This reduction is equivalent to an increase in the hourly rate of 2.86%. I can confirm that part time individuals will not have their contracted hours reduced to absorb the hour. A consolidated pay increase of 3.5% in April 09. Saturday premium payments will continue until 31 st March 09. In April 2009 when Saturday premium is withdrawn, a lump sum payment of 3.5 x each person s actual 2008/09 Saturday premium earnings will be paid. The calculation of the Saturday premium buyout for long term absence will be as detailed for the POs. The new job title will be Retail Sales Consultant. We are willing to consider joint consultation on this name however we need to agree on some credible choices that reflect the duties of the role. With effect from April 09 the creation of a nominal salary for pensionable purposes that is 3.3 % higher than base salary. This salary would be used to calculate final salary payments on retirement, should there be changes to the pension scheme following the consultation exercise, the 3.3 % benefit would also apply in all circumstances going forward. Members who choose to accept this option would be required to make employee pension contributions at the normal rate but based on this higher nominal salary. RAs on max From 1 st October 2007 a consolidated pay rise of 3.4% - 16,000 Saturday premium payments will continue until 31 st March 09. In April 2009 when Saturday premium is withdrawn, a lump sum payment of 3.5 x each person s actual 2008/09 Saturday premium earnings will be paid. The 49

50 calculation of the Saturday premium buyout for long term absence will be as detailed for the POs. The new job title will be Retail Sales Consultant. Crown Customer Service Consultant - Advanced Should be at this level within 2 years max CSA 5,6,PO, DBM Career Path Opportunities I feel we worked well with you and your colleagues to construct and agree the Crown Career Path. The key objective of introducing the Career Path is the simplification of grades and levels, greater role clarity and the acceptance of the need to work flexibly and successfully sell a growing range of products in addition to excellent counter and customer service skills. The career path is constructed as follows: Role Pay rate Time in role Maps to Retail Sales Consultant - Entry Retail Sales Consultant- Fully Competent Crown Customer Service Consultant - entry level Crown Customer Service Consultant - Fully competent months CSA1 CSA Must be a t this level within 12 months of joining ( ) months CSA months CSA 4 CSA 3, RA Mid, CSA 4 and RA Max ( ) The Career path gives career and progression clarity and makes it clear how to progress between levels, I am pleased that the progression process has been greatly simplified based on lessons learned from the CSA pay grades. Product Sales Specialists: In addition there are further progression opportunities all Retail and Customer Service Colleagues will have the opportunity to earn a pensionable allowance of 1000 a year by becoming Product Sales Specialists selling telephony, travel products and, in branches without a FSS in post, Financial services products. There will be the opportunity to earn personal commission as well as contributing to the branch bonus pot. It is likely that targets for these roles will be available from January onwards. Financial Services Specialists: Counter colleagues (and exceptionally Retail colleagues) can also apply to become Financial Services Specialists for which, depending on performance, they will attract an additional pensionable payment up to There will be the opportunity to earn personal commission as well as contributing to the branch bonus pot. Recruitment is already underway for the 1 st 200 FSS roles to be in place in the final quarter of this financial year with a further 540 to be appointed during the financial year 08/09. Colleagues will need to apply for these roles and maintain the necessary level of performance. Inflation Proofing If the RPI inflation measure is between 3.5% and 4.5% in March 2009 then the pay increase applied will match inflation for the CSA s and will be inflation less the sum required for 50

51 equalisation for the POs. If inflation in March 2009 is above 4.5% then further pay discussions will be required. Colleague Share Dividend We agreed that for 2008 the potential dividend of 800 would be split 75% based on POL profit and 25% on Group profit performance as opposed to the 50:50 split originally proposed. Bonus: The potential bonus pot for CWU grades for the remainder of this year had increased by more than 1m as a result of the rewards available for selling the new broadband product and a proposed Q4 incentive (details still being finalised). It was also agreed to refund half the bonus stopped due to strike action as the bonus rules refer to stoppages in terms of days rather than periods of action. This correction would be made in the first pay period after the deal is agreed. We also agreed to remove this stoppage clause from the scheme rules in the future. We will work with you and your team over the next few months to jointly review the network sales incentive scheme. Given the financial challenges faced by POL in order to return to profit by 2011 we have worked with you to construct the best offer possible in the circumstances and hope you will feel able to accept this offer and work with us to explain and recommend it to our employees and your members. Yours sincerely Debbie Moore P&OD Director Post Office Ltd Continuity Payment We also agreed that we would reinstate the stopped 1000 continuity payment for people taking official strike action in those branches, either migrating to WHS or the 15 that are likely to be closed or franchised to other partners, provided the sales and service criteria had been met. Future of the Crown Network Alan Cook, Managing Director is pleased to confirm that the future of the 373 branches remaining in the Crown Network will be secured until at least

52 APPENDIX C: DOCUMENTS RELATING TO MEMBERS REACTION LTB158/16: Post Office: Pensions Defined Benefit Scheme Proposal to close the scheme LTB200/16: Post Office Pensions Consultative Ballot Result Attachment to LTB200/16 Bulletin to members Letter to Paula Vennells: Pensions Consultative Ballot Result Attachment to letter to Paula Vennells - Ballot Result Emergency Motion 52

53 Letter to Branches For instant updates: http//: The Broadway, Wimbledon, London, SW19 1RX Tel: Fax: General Secretary: Dave Ward No:158/16 Ref: 115 Date: 14 th March 2016 TO: ALL BRANCHES WITH POSTAL MEMBERS Dear Colleague POST OFFICE: PENSIONS - DEFINED BENEFIT SCHEME PROPOSAL TO CLOSE THE SCHEME Further to LTB 063/16 and in reference to the Post Office s proposal to close the Post Office Defined Benefits (DB) Section of the Royal Mail Pension Plan (RMPP). Despite our strong objections to the unnecessary haste, the Post Office went ahead with its 60 day member consultation which closes on 8th April. We consider this consultation exercise a sham - it is a flawed process specifically designed to push through the changes proposed. However, despite our strong reservations we must ensure members have their say and participate in the consultation in order to let the Post Office know what they really think about these outrageous attacks on their pension and future wellbeing. Engagement with Members It is therefore imperative Branches and Representatives encourage membership participation in the Post Office consultation exercise. The DB scheme is NOT in crisis and there is NO deficit. In fact there is a very healthy surplus of 136.1m as at September 2015 (indeed the current surplus is higher than at the last formal valuation in April 2012 when it was 135.4m). The surplus, by the Post Office s own projections based on expert opinion, is not expected to run down until late The Post Office is therefore acting with unnecessary haste in conducting the members consultation and in its timescales with regards to the proposal to close the scheme. If the DB scheme is closed, DB members will be significantly worse off. Members can participate by one of the following options: the pension consultation helpdesk on postofficepensions@willstowerswatson.com Write to them at Pension Consultation Feedback, The Post Office, HR Service Centre, 120 Bark Street, Bolton, BL1 2AX COMMUNICATION WORKERS UNION URGENT INFORMATION FOR MEMBERS Facebook: Dave Ward

54 Next Steps - Consultative ballot (all Members) As part of our membership engagement, the Postal Executive has agreed to instigate a consultative individual members ballot (conducted by independent scrutineers), seeking support for the Postal Executive s position which as follows: 1. Opposing the closure of the DB scheme. 2. To significantly improve the current Defined Contribution (DC) scheme. We feel it is appropriate to involve all members in the consultative ballot, irrespective of which scheme they are in. This is necessary to ensure that our policy we are asking members to support doesn t focus solely on the DB scheme as we also need to provide direction and leadership in respect of improving the DC scheme. The question on the ballot paper will be as follows: Do you support the key union policy to keep open the Defined Benefit Scheme to existing members whilst also securing an improved Defined Contribution scheme for current DC scheme members? The dates for the consultative ballot are as follows: Ballot papers dispatched Ballot closes Friday 18th March Friday 1st April We need to ensure an overwhelming YES vote from members supporting our policies above. We also need an exceptionally good turnout from this activity as the ballot result will then feed in to the union s submission to the Post Office s formal consultation and to the Trustee through our Body of Evidence (which is the term we are using for our submission). A bulletin is being sent to members home addresses today and is attached to this LTB for your information. Engaging With and Educating Members We now have a dedicated section on the CWU website which Branches and members can visit to find out the latest information on our campaign to oppose the Post Office s plans. This can be accessed by using the following link: All communications to members are available to download, as well as web articles and videos. Finally, Dave Ward, General Secretary and myself are meeting with Baroness Neville-Rolfe, the Post Office Minister BIS, on 22 nd March to bring to her attention our opposition to the Post Office s disgraceful attack on our members pensions. Further developments in this regard will be reported. If you have any questions in relation to this LTB, please contact Lea Sheridan - lsheridan@cwu.org. Yours sincerely Andy Furey Assistant Secretary

55 No. 200/ st April 2016 POST OFFICE: PENSIONS CONSULTATIVE BALLOT RESULT Dear Colleagues Further to LTB 158 dated 14 th March, I would like to advise Branches that our Post Office members have voted overwhelmingly to support the Postal Executive s policy in regards to pensions. As a reminder, the question on the ballot paper was: Do you support the key union policy to keep open the Defined Benefit Scheme to existing members whilst also securing an improved Defined Contribution scheme for current DC scheme members? The result of the ballot is as follows: BALLOT RESULT YES VOTES 1, % NO VOTES 6 0.4% TURNOUT 44% spoilt ballot papers (no votes cast): 3 It is clear from this emphatic result that our members strongly believe the Post Office should not close the Defined Benefit (DB) scheme. Furthermore our members have also supported the policy of improving the Defined Contribution (DC) scheme for current members. In view of this ballot result I have today written to Paula Vennells, Chief Executive, urging her to: immediately abandon the plan to close the DB scheme enter into meaningful negotiations with the aim of improving the DC scheme for existing members. We have also written to members to inform them of the ballot result and a copy of this communication is attached for your information.

56 Extension of Post Office Consultation with Members on Pensions (to 31 st May) Yesterday the Post Office announced it is extending its consultation with members with regards to the plans to close the DB pension scheme (Post Office communication attached). This is the second extension to the consultation within two weeks. Of serious concern was the reason for extending the closing date to 31 st May which was given as current changes to our business which may include proposals for collective redundancies. The Post Office also stated Employees and their representatives should be able to take the potential for redundancies into account when responding to the proposed changes to pensions, and an extension to the consultation period will enable this. We are due to meet with the Post Office again next week to discuss the job losses above and further developments in this regard will be reported. Engaging With and Educating Members Branches and members can view our latest video featuring our pensions expert Hilary Salt from First Actuarial who explains in simple terms what the Post Office s proposals mean for our members. This can be accessed by using the following link: Meeting with Baroness Neville-Rolfe Minister for Postal Affairs Dave Ward our General Secretary and I met with the Minister for Postal Affairs on Tuesday 22nd March. We discussed our strong objections to the Post Office s plans for closing the DB scheme. We made it clear to the Minister the Union will not tolerate the unacceptable closure of our DB pension scheme which is healthy now and is projected to be healthy for many years to come. Dave also indicated how outrageous it was that the Post Office was seeking to penalise its hard-working, loyal employees with a blatant attempt to save costs as a consequence of its failed business plan and policies. Consequently, we left the Minister with the strong impression that the Post Office s actions are unnecessary and premature and this Union will do everything possible to protect the well-being of our members and their pensions. The Postal Executive will be giving full consideration to the matter of Post Office pensions at its statutory meeting on Tuesday 5 th April. Further developments will be reported. Yours sincerely Andy Furey Assistant Secretary

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