Royal Mail’s new pension scheme — the first of its kind in the United Kingdom — fell nearly 5 per cent in its first six months, raising questions over future payout levels for its more than 100,000 members. The Royal Mail Collective Pension Plan, a collective defined contribution (CDC) scheme launched in October 2024 after six years of planning, declined 4.6 per cent in the period to the end of March, against a 3.6 per cent fall in its benchmark index, according to results first reported by the Financial Times.
Why the result matters beyond Royal Mail
The performance figures arrive as the UK government pushes for wider adoption of CDC plans, which sit halfway between traditional defined-benefit pensions, with their predictable payouts, and standard defined-contribution pots, where retirement income depends entirely on contributions and investment performance. In a CDC, members participate in a pooled fund and are given a target income around which to plan retirement — but returns are not guaranteed, and the employer has no obligation to make up any shortfall.
Royal Mail’s plan was the first CDC established after enabling regulation was approved in 2021, so its early record is being watched closely by other employers weighing similar schemes. The government hopes pooled products of this kind will lift retiree incomes and channel savings into a broader range of assets. Pensions minister Torsten Bell has said that new rules allowing many private-sector employers to join CDC schemes could boost retirement incomes by 25 to 60 per cent, and that while it is too early to say whether CDC will become the main option in the UK’s roughly £600bn workplace defined-contribution market, it should play an important role in the future pension system.
What drove the decline
The plan’s portfolio is heavily weighted toward growth assets. At the start of April, 77 per cent of the fund — which held assets of £192 million — was invested in global equities tracking a benchmark aligned with the goal of limiting global warming to 1.5C. A further 9 per cent sat in small-cap equities and 9 per cent in emerging-market stocks. BlackRock, the plan’s outsourced chief investment officer, declined to comment on the results.
People familiar with the scheme cautioned against drawing long-term conclusions from six months of data, noting that a newly launched fund’s returns are heavily affected by the timing of contribution inflows. A spokesperson for the plan said it was designed to hold long-term growth investments that tolerate short-term volatility, and that returns since the end of March had been positive.
The transparency question
The sharper criticism concerns communication rather than performance. Independent pensions consultant John Ralfe has argued that the real issue is a lack of clarity about how investment performance — above or below target — translates into changes in members’ target pensions, and that the scheme should be fully transparent about its calculations and their impact on different age groups. Royal Mail has said it plans to update members on their target pensions and how they are calculated.
The corporate backdrop
Royal Mail’s parent company, International Distributions Services, was acquired in 2024 by EP Group, led by Czech billionaire Daniel Křetínský, who has pledged to strengthen the postal service’s finances. Křetínský is also known in the UK for investments in supermarket chain J Sainsbury and football club West Ham United.
Limitations and what to watch
Six months is a very short window for judging a pension vehicle designed to smooth outcomes over decades, and a single scheme cannot prove or disprove the CDC model. The more meaningful tests will come over time: how the scheme communicates target-pension adjustments to members of different ages, whether performance recovers across a full market cycle, and whether other UK employers follow Royal Mail into CDC now that regulations permit multi-employer schemes. Analysis of the early results is available from Yahoo Finance, and the UK Parliament’s Work and Pensions Committee has published written evidence on CDC schemes for readers who want the policy detail.
Related reading on this site: the UK Employment Rights Act 2025 and Britain’s labour-market reforms.
