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Royal Mail\u2019s new pension scheme, the first of its kind in the UK, fell almost 5 per cent in its first six months, raising questions over the level of future payouts for its more than 100,000 members who include postal workers. <\/p>\n
The Royal Mail Collective Pension Plan, a collective defined contribution (CDC) scheme launched in October last year after six years of planning, dropped 4.6 per cent by the end of March, compared to a 3.6 per cent decline in its benchmark index, according to its results seen by the Financial Times.<\/p>\n
The results come as the government wants to encourage wider take-up of such schemes<\/a>, which offer a halfway house between traditional defined-benefit pension plans that offer predictable payouts, and defined-contribution plans, where income is based on contributions and investment performance. <\/p>\n The postal group\u2019s CDC was the first to be set up after the schemes were allowed in 2021 and its performance will be closely watched by other employers. The government hopes the pooled products will boost incomes for retirees and channel savings into a wider range of assets.<\/p>\n But people familiar with Royal Mail<\/a>\u2019s CDC, which has 110,000 members, stressed that it was too early to draw conclusions about payouts in the long term. The fund was just getting started, and flows and timing had an outsized impact on returns, they added. <\/p>\n A spokesperson for the CDC said it was \u201cdesigned to hold long-term growth investments that allow for short-term volatility\u201d and that it had delivered \u201cpositive\u201d returns since the end of March. <\/p>\n The results showed that 77 per cent of the fund, which had \u00a3192mn of assets at the start of April, was invested in global equities that follow a benchmark designed for investors who want their portfolios to match a goal of limiting global warming to 1.5C. <\/p>\n The fund had 9 per cent in small-cap equities and another 9 per cent in emerging market stocks. BlackRock, the outsourced chief investment officer for the scheme, declined to comment. <\/p>\n CDC members participate in a pooled scheme and are offered a target return around which they can plan their retirements. But returns are not fixed and companies are not obliged to make up any funding shortfalls. <\/p>\n John Ralfe, an independent pensions consultant, said the \u201creal issue\u201d was a lack of clarity about how performance \u2014 up or down \u2014 translates to a change in target pensions. He said that Royal Mail CDC must be \u201centirely transparent\u201d about its calculations and the impact on different age groups. <\/p>\n Royal Mail plans to update scheme members on their target pensions and how these are calculated in the spring. <\/p>\n