Royal Mail’s pension scheme could close

The chairman of Royal Mail’s pension trustees in the UK is considering plans to close its retirement scheme to existing members after legislation to part-privatise the postal service was shelved, report The Times.

The chairman of Royal Mail’s pension trustees in the UK is considering plans to close its retirement scheme to existing members after legislation to part-privatise the postal service was shelved, report The Times.

The UK newspaper states:

It is understood that Jane Newell is mulling over whether the best option for postal workers is to close the pension scheme and force members to join a new retirement pot with far less lucrative benefits. As chairman of the trustees, Newell has the power to shut the scheme but any decision would also be dependent on the agreement of Royal Mail’s management.

It is feared that such a move would trigger strike action across the country as heavily unionised postal workers opposed the future loss of generous final-salary pension benefits.

Lord Mandelson, the business secretary, told the House of Lords that proposed legislation to reform Royal Mail by selling a 30% stake in it had been shelved. Had he been able to attract £3bn for the stake and convince the 140 backbench Labour MPs who oppose the move, the government would have taken responsibility for the Royal Mail pension pot.

The pension scheme has a deficit of £3.4bn and a revaluation now under way is expected to show a deficit of up to £10bn. Such a shortfall would almost triple the sum that Royal Mail would have to contribute to the fund and plunge the postal service deeper into the red.

The trustees are furious with the government and Royal Mail for failing to secure legislation that would have reformed the postal group. It is understood that they are seeking meetings with Royal Mail management to discuss how best to cope with the pension deficit.

Donald Brydon, Royal Mail’s chairman, indicated in June that he was ready to close the group’s final-salary pension scheme if the government failed to partly privatise the postal group. He said: “If we don’t get this relief from the government, we are going to have to look at . . . closing the pension scheme to existing members.”

Effectively, reform of Royal Mail has now been delayed until after the next general election. However, it is feared that by the time the next administration begins to grapple with Royal Mail’s future, the postal operator’s pension deficit will have ballooned to £10bn and the group will have lost even more business. Volumes are declining by 10% annually.

A spokesman for the pension trustees declined to comment on Newell’s plans to close the scheme. Lord Mandelson said on 3 July he was unaware of such proposals and Royal Mail was unavailable for comment.