LTB 019/20 Post Office: Royal Mail Pension Plan (Post Office Section) – RMPP Trustee Decision & DB Pension Scheme Surplus
No. 019/2020
13th January 2020
Dear Colleagues
POST OFFICE: ROYAL MAIL PENSION PLAN (POST OFFICE SECTION) – RMPP TRUSTEE DECISION & DB PENSION SCHEME SURPLUS
Branches will be aware that the Trustees of the RMPP in 2017 made a decision to invest £453m (via a “buy-in”) in a Rothesay Life insurance policy for scheme members in the Post Office section. The objective of the buy-in was to protect scheme members and their benefits. The Trustee made the following statement at the time:
“The Trustee believes the purchase of this insurance policy is in the best interests of members because it improves the security of your pension benefits.”
RMPP Trustee to Implement a “Buy-Out” to Individual Rothesay Policies
The Trustee is now planning a further change in the way benefits are provided by moving from a Group insurance policy (the “buy-in”) to an individual pension policy similarly through Rothesay Life (the “buy-out”). This Trustee decision to move to an individual pension policy through Rothesay Life will be implemented later this year.
Crucially, the Trustee has confirmed that the value of members’ benefits, and any increases due in the future, will not change due to the transfer from RMPP to Rothesay Life individual policies.
The Rothesay Life buy-out applies only to those members who were employed prior to 1st April 2008 and are members of the RMPP – the Defined Benefit Pension Scheme which closed on 31st March 2017.
RMPP Trustee Communication to Scheme Members
A letter from the Trustee to scheme members’ home addresses should arrive tomorrow and is attached for information purposes.
The Trustee letter states the following:
“After careful consideration, and having received advice from its advisors, the Trustee has decided the time is right to move to the next step of converting this bulk insurance policy into individual policies for each member”.
The Trustee also states:
“A key benefit of doing this is that it reduces the expenses of running the RMPP, which in turn helps to protect the value of the surplus .…”
Surplus in the DB Pension Scheme (closed 31st March 2017)
The Trustee letter includes a “Valuation Report” on the surplus in the DB pension scheme, which stood at £24m as at 31st March 2018 following the last actuarial valuation. A subsequent funding update determined the surplus stood at £28m as of 31st March 2019.
The Trustee has assured us moving to an individual Rothesay Life policy is necessary to free up the DB pension scheme surplus. The Post Office has also confirmed in a Joint Statement the surplus must be used for the benefit of scheme members:
“The Post Office is clear that any surplus available must be used for the benefit of scheme members and therefore reached a formal agreement (called a Memorandum of Understanding) with the Trustee in 2017 to this effect.”
Further discussions are planned to be held with the Trustee in terms of:
• How much of the surplus can be distributed (and when this should happen)?
• How should the surplus distribution be allocated between members?
• In what way should the surplus be allocated?
Joint Statement – CWU, Post Office & Unite
To support our members understanding in terms of what this means for them, we have agreed a Joint Statement with the Post Office and Unite. This Joint Statement, which the Trustee has been provided with, is attached.
The Post Office is also planning a direct communication to scheme members via email and members will be briefed from the morning of Tuesday 14th January (for Crown members this will be via the Teamtalk). A managers’ brief has been produced to assist in this exercise. Copies of these documents have been provided to the Union in advance and we have shared these with our Representatives on full-time release.
The Trustee has also provided the Pension Service Centre (PSC) in Pond Street, Sheffield with a comprehensive set of Frequently Asked Questions and these FAQs will also be placed on the RMPP website (Post Office Section).
I am confident our members will be pleased that this buy-out will ultimately lead to the distribution of the surplus in the DB pension scheme. The reaction of our members to the Rothesay Life buy-out will be monitored, although the Trustee letter together with the Joint Statement should provide the necessary reassurance.
Yours sincerely
Andy Furey
Assistant Secretary