Royal Mail to announce record pensions deficit?
Royal Mail is set to enter the record books next year — but perhaps not in the way it would wish to, reports The Times. The article continues:
The postal operator confirmed yesterday that it is on course to report a deficit in its pension fund of £10bn, breaking the record held by BT, which last month reported a deficit of £9.4bn.
Adam Crozier, Royal Mail chief executive, said the pension fund deficit was being revalued, but confirmed the figure was likely to be at least £10bn, compared with £3.4bn at the last valuation three years ago.
He told The Times: “The really difficult thing lying behind all this [the company’s performance] is still the pension problem. It will be another two to three months before we know the exact size of the deficit, depending on the actuaries.”
Dave Ward, deputy general secretary of the Communication Workers Union, said the union was as “daunted” by the scale of the pensions deficit as Royal Mail itself. He added: “The Government must take responsibility and honour its commitment for the deficit which will allow the company to continue with a modernisation programme which increases profits, quality of service and greater innovation in products and services.”
Under proposals tabled by Lord Mandelson, the business secretary, the Government had hoped to transfer Royal Mail’s pension deficit to the taxpayer. However, because these proposals were linked to a part-private Royal Mail, they were scuppered by backbench Labour MPs and have since been taken off the table. They are unlikely to be revived this side of the general election.
Royal Mail confirmed yesterday that a £305m payment into the pension scheme during the six months to 30 September – part of a plan to pay at least £260m into the scheme annually during the next 14 years – more than wiped out its profits during the period.
The company reported a 4% rise in operating profits, to £184m, despite a 1.6% drop in group revenues due to the recession and the decline in mail volumes.
The figures do not cover the period in which Royal Mail was hit by a series of national strikes by members of the Communication Workers Union but do include the impact of a number of unofficial walkouts.
Crozier said that much of the improvement was a result of the modernisation programme, which meant 5,000 people left the business during the period, taking the total since spring 2002 to about 60,000.
He said the results fully justified the programme, much of which was pushed through in the face of opposition from the union, which is discussing plans with Royal Mail under a peace deal brokered by the TUC to halt the strikes.
“We genuinely do understand that change is difficult for our people but what this shows is that modernisation does work,” Crozier said. “Change is difficult for everyone but Royal Mail has no alternative but to change and modernise if it is to compete in today’s highly competitive communications market.”
Crozier said that two thirds of the revenue decline were structural and the rest down to the recession.
Ward said: “These financial results betray the myth that the CWU has been blocking change. Postal workers are working harder than ever before. We believe they deserve to be rewarded for the success they have brought to this change process which has delivered a 4% increase in half-year profits.”
