Each year, we the Trustee, and some of the Collective Plan’s advisers will work out what adjustments need to be made to everyone’s income for life and lump sum.
We’re the people who look after the Collective Plan and we’re independent of Royal Mail.
We make important decisions about how the Collective Plan is run, and are responsible for the day-to-day running of the Collective Plan.
Get to know usTwo of our key roles as the Trustee are to take care of the money paid into the Collective Plan, and make sure the Collective Plan is running effectively.
There are a set of investment rules which the Trustee must follow.
We set the Collective Plan’s investment strategy within the bounds of these rules after taking advice from our investment advisers.
Together, we’ll look at the Collective Plan’s investments and estimated future spend to work out how much we need to adjust everyone’s income for life and lump sum by.
These adjustments are part of how the Collective Plan works. How they’re worked out is a complicated process, set by the Collective Plan’s Trust Deed & Rules and with some parts set out in law.
How your yearly income for life adjustment is worked out
1. Every year we’ll carry out an exercise with the Collective Plan’s Actuary, called a ‘valuation’.
This yearly valuation will look at:
How much money is available in the Collective Plan’s income for life section to pay member’s incomes for life (this is known as the income for life assets). | VS | How much money would be needed to pay all member’s incomes for life in the future at either their current level or with increases applied in every future year. |
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Working out how much money might be needed in the future is complex, but the Trustee and Collective Plan’s Actuary will consider things like the following and set assumptions for what they might be:
how the Collective Plan’s income for life section investments may perform in the future, and
for how many years the Collective Plan will need to pay member’s incomes, on average.
These are assumptions and must be the Trustee’s central estimate of what they think will happen in the future (aiming to avoid being optimistic or pessimistic about future events).
2. The yearly valuation will tell us if your income for life will go up, go down or stay the same
If incomes for life are due to go up or down, the yearly valuation will also tell us by how much. If the valuation shows that there are enough assets to support an increase to those in every future year that the incomes are expected to be paid, then we can work out the level of that increase. If instead there are not enough assets to pay the current level of income for life, then the incomes will decrease so that there are enough assets to pay incomes in future.
Everyone is in this together and will share in the ups and downs of the Collective Plan. The amount that your income for life is adjusted by each year will be worked out as a percentage. It doesn’t make a difference if you’ve already retired and are receiving your income for life or if you haven’t retired yet and are still building up your income for life - everyone’s income for life is adjusted by the same percentage on 31 March each year.
3. We’ll explain how we work out the adjustments each year
We’ll explain your adjustment each year when we tell you whether your income will go up, down or stay the same.
How your yearly lump sum adjustment is worked out
The process is similar for your lump sum as for your income for life - but the amount you’ve already built-up as a lump sum can’t go down.
1. Every year we’ll carry out an exercise with the Collective Plan’s Actuary, called a ‘valuation’.
This yearly valuation will look at:
How much money is available in the Collective Plan’s lump sum section to pay member’s lump sum (this is known as the lump sum assets). | VS | What is likely to be needed to pay all members’ lump sums. |
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Each year, the lump sum section will typically adjust at a different rate compared to the adjustments in the income for life section. This is because the lump sum section’s adjustments are based on the assets within that section, as well as the cost of future lump sum payments.
If there aren’t enough assets to pay the current lump sum for all members at age 67, Royal Mail must provide additional funding to the assets of the lump sum Section.
2. The yearly valuation will tell us if members lump sum will go up or stay the same
If lump sums are due to go up, the yearly valuation will also tell us by how much. It is the level of increase that the assets would support every year in future.
The amount that lump sums are adjusted each year will be worked out as a percentage, and the same percentage will be applied to all members’ lump sums on 31 March each year.
If it’s estimated that there is not enough money in the Collective Plan’s lump sum section to pay members their lump sums, Royal Mail may ask the Trustee to use money set aside as a reserve and/or Royal Mail might have to pay in extra money so that the lump sums will be paid in full.
3. We’ll tell you each year whether your lump sum will go up or stay the same
And, if it will go up – we’ll tell you by how much.
You can find more detailed information about yearly adjustments on pages 14 to 15 of the Scheme Design Statement.
Page last updated 10 October 2024
We’re a group of people from different backgrounds, and we’re supported by a range of advisers who are experts in their field.
Our goal is to provide our members with a secure income for life and a one-off cash lump sum after they finish working, to help them live the life they want in retirement.
Get to know us.
The Trustee board will usually have 9 Trustee Directors.
Once the Collective Plan has launched there will usually be 4 of us nominated by members (known as Employee Nominated Directors), and 5 nominated by Royal Mail (known as Employer Nominated Directors), including the Chair. Royal Mail workforce’s Unions must also approve our Chair.
We’ll be looking for Employee Nominated Directors soon – and we’ll keep this section of the website updated with who our new Trustee Directors are once they’ve joined the Trustee Board. For now, you can see who our current Trustee Directors are below, and our team of experts who help us make sure the Collective Plan is well looked after:
Page last updated 10 October 2024
Our role
All of the money paid into the Collective Plan is held in a Trust, which is separate from Royal Mail. Royal Mail pays money into the Collective Plan as the ‘sponsoring employer’ of the Collective Plan. The Trust is run by us (your Trustee) and we make important decisions about how the Collective Plan is run, and are responsible for the day-to-day running of the Collective Plan, not Royal Mail.
Our role is to:
act in line with the Collective Plan’s Trust Deed & Rules (the legal document that covers the Collective Plan)
act in the best interests of the Collective Plan’s members (as well as other beneficiaries and prospective members) and,
act impartially, prudently, responsibly and honestly
Our responsibilities
As you can probably imagine, the Government expects quite a bit from a Trustee Board who look after the collective savings of tens of thousands of people.
Our responsibilities are all about making sure the Collective Plan runs as it should.
Some of the key things we are responsible for are:
making decisions about how the Collective Plan’s money will be invested
getting regular Collective Plan valuations, so that we can apply changes (also known as adjustments) to every member's income for life and lump sum
giving information to you about your savings in the Collective Plan
giving The Pensions Regulator (TPR) information about the Collective Plan so they know it’s being run well
appointing and reviewing the performance of the Collective Plan’s advisers and providers
How Royal Mail fits in
Royal Mail doesn’t have direct responsibility for the day-to-day running of the Collective Plan – it’s what’s known as the ‘sponsoring employer’. They have established the Collective Plan and decided on the benefits to be provided from the Collective Plan. The Collective Plan’s Trust Deed & Rules sets out the benefits and the rules within which the Trustee Board must act – these include rules on investment.
Their money, alongside yours, goes into the Collective Plan. So, at times, they will work with us and come to our meetings to understand what’s going on and how the Collective Plan’s being run. There are some circumstances under the Collective Plan's Trust Deed & Rules where they have decision making powers in relation to the Collective Plan, but the operation of the Collective Plan is ultimately the Trustee’s responsibility.
Page last updated 10 October 2024
The payments made by you and Royal Mail are pooled together and invested in things like the following, with the aim to grow your money in order to pay bigger benefits to you, though this is not guaranteed:
Equities – these are shares in companies (also known as stocks)
Property - usually invested in commercial property (like shopping centres)
Bonds – these are loans made to governments or companies which pay an agreed rate of interest until a set date
Money Market Investments – this could be money on deposits (e.g. cash in a bank account) or short-to medium-term loans to governments, high quality banks and companies with strong credit ratings
In detail
You can also take a look at our Statement of Investment Principles for more detailed information about our investment strategy.
The Collective Plan is split into two main sections, each with its own investment strategy:
1. One for your income for life, (also known as the CDC section)
2. One for your lump sum (also known as the DBLS section)
We're responsible for managing the pooled investments that provide your income for life and your lump sum, but must act within the investment rules that have been set by Royal Mail.
There are also separate investment options if you choose to pay any Additional Voluntary Contributions (AVCs), which are optional extra payments you can make. There is a default investment strategy for AVCs, but there is a range of investment options and you can pick from them if you want to. More information about AVC investment options is available in the AVC Handbook.
You build up an income for life based on 1/80th of your pensionable pay for each year you pay into the Collective Plan, but the rate or amount of income provided by the Collective Plan isn’t guaranteed. We use a range of different investments to help us balance the risks that come with investing – with the aim to keep up with the cost of living. But some years your income for life could go down or stay the same.
We pool everyone’s money, which is held in the section relating to your income for life, together into one big, collective investment. This means that we’re able to balance risk across all members. As a result, we can target higher return investments that might go down in the short-term but are estimated to deliver higher growth over the long-term.
This is one of the reasons why in some years you‘re likely to see your income for life go down, or not keep up with the cost of living.
The aim is that by accepting short-term risk and that there might be some years where your income could go down, we’re able to provide a greater overall income for you in your lifetime. Though, all investments come with risk and this is not guaranteed.
The investments will change as the membership of the Collective Plan changes. For example, as members get older and retire, the Collective Plan will start paying more and more members their income for life. And so, the investment strategy will need to change to align with the need to pay more members their incomes for life.
The amount you’ll get as a lump sum is guaranteed by Royal Mail to be at least of 3/80ths of your pensionable pay for each year you pay into the Collective Plan, if you get your lump sum at age 67.
Like your income for life, the payments you and Royal Mail make are put towards this - and they’re invested collectively. If these investments perform well, it’s likely that your lump sum will go up. Your lump sum could also stay the same, but it won’t go down (no matter how these investments perform). Any yearly increases made to your lump sum will be guaranteed and cannot be taken away in the future.
Because your lump sum is a guaranteed amount, there’s likely to be a greater focus on lower-risk investments that are considered less likely to go down in the short-term but might not deliver as much growth over the long term.
Some of Royal Mail’s payments towards your lump sum are held in a reserve. This reserve is not used to pay your lump sum or considered when applying any increases. If it’s estimated that there is not enough money to pay everyone’s lump sum, then money from the reserve can be used. From time to time, if it’s decided the reserve has enough in it, money can be released from the reserve towards your lump sum.
Investing your booster
If you choose to boost what you pay into the Collective Plan, this money (along with Royal Mail’s matched payment) will be invested in the same way as the other lump sum investments to fund your lump sum.
You can also make AVCs into a separate pot – these don’t count towards your income for life or lump sum. And they won’t be matched by Royal Mail.
Instead, you’ll save these AVCs up in a separate pot that is just for you, currently administered by Scottish Widows. There are different rules about how you invest your AVCs and unlike the other two sections you do have a choice to make about how your money is invested. There is a default investment strategy for AVCs, but there is a range of investment options and you can pick from them if you want to. More information about AVC investment options is available in the AVC Handbook.
How the money in the Collective Plan is invested can play an important role in the future of our society and planet.
We’re committed to a sustainable investment strategy, which considers the environmental, social and governance practices of the organisations the Collective Plan invests in, and the impact these investments have. This is part of our overall objective of considering long-term risks in order to optimise financial returns.
Our Statement of Investment Principles, known as a ‘SIP’ explains more about how we invest your money.
Because the Collective Plan’s money is invested collectively, the Collective Plan may not be suitable for you if you would prefer to invest in Sharia compliant funds.
If this applies to you, please contact Royal Mail’s HR Services for more information.
Page last updated 10 October 2024