Royal Mail ready to launch first U.K. collective DC plan
The Royal Mail Group Ltd. is getting closer to the launch of its long-awaited collective defined contribution plan, which will be U.K.’s first such plan, as the government unveiled a final set of CDC requirements on July 19.
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Sponsors of defined benefit funds in the U.K. such as Royal Mail, which have been grappling with the increasing costs of running a pension fund will soon be able to switch to a more affordable alternative.
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That alternative is a CDC plan, a bridge between a DB fund and a pure DC plan, in which lifelong income is secured by pooling participant assets and investments in both accumulation and decumulation phases of the retirement journey, with participants bearing the investment and longevity risks instead of the plan sponsor.
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“Our goal was to create a plan that was affordable, sustainable and secure for the members and for the business,” said Angela Gough, London-based head of corporate pensions at Royal Mail.
The government expects CDC plans such as Royal Mail’s to be cheaper for employers because they won’t require sponsors to guarantee how much participants will receive each year.
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