Agreement on Royal Mail pay offer and modernisation and support for pension reform

Royal Mail is pleased to announce that the Communications Workers Union has accepted the company’s offer on pay along with plans to modernise the company and reform the pension scheme.

Royal Mail has made a two year proposal which provides a stable base from which the company, its customers and our people can move forward. The CWU’s acceptance of the proposal means that Royal Mail can now go ahead with essential plans to modernise the business and make it more flexible, efficient and able to compete properly in the marketplace. It also secures support for the pension reform that is a major element in safeguarding the future of the business and our people’s jobs.

Royal Mail Chief Executive Adam Crozier said: "All along we have been clear that to become competitive we needed flexibility to modernise and we needed to reform our pension scheme because the costs were crippling the company. This deal, which is within the parameters we clearly set for pay this year, gives Royal Mail a fighting chance of success in the future.

The key points agreed today are:

• An increase of 5.4 pct on basic pay and weekday overtime from 1 October (equivalent to a cost of 2.5 pct in the financial year from April 2007 to March 2008).
• A one-off lump sum of GBP 175, from an existing employee "share of savings" scheme and so at no extra cost to Royal Mail.
• The flexibility we need to modernise our operations so that we can compete effectively against rivals who have already modernised and so have lower costs and prices than Royal Mail. For example this includes:

 Full cooperation and support on the deployment of new technology.
 Ensuring all our peoples’ paid work hours are utilised
 Covering for one another within a unit – and within paid hours – to help absorb colleagues’ absence or an increase in workload
 Rebalancing the normal working pattern to reflect the traffic profile (such as higher or lower levels of mail on certain days of the week)
• The union’s support for the company’s overall proposed pension reform. Royal Mail’s proposals include:
 Closing the final salary scheme to new members from 31 January 2008 and replacing it with a Defined Contribution scheme
 Protecting our existing employees’ pension pots built up before 1 April 2008, including keeping the link to final salary
 Introducing a Career Average Defined Benefit scheme for our existing employees from 1 April 2008
 Moving the normal retirement age from 60 to 65 from 1 April 2010.
 Existing members will be able to take the pension built up prior to April 2010 at age 60 or at any time after that paid in line with current scheme rules. Pension built up after April 2010 will be paid on an actuarially reduced basis if taken before 65 or unreduced if taken at 65.
• As before, the potential for our people to earn GBP 800 in dividends from the Colleague Share scheme this year if the company hits its targets.
• As before, a 50:50 share of any additional efficiency savings above target made this year.
• An increase of 1.5 pct in basic pay from April next year, paid on delivery of the agreed reforms.

The CWU will shortly ballot its members on the agreement, which has now been recommended by the union’s executive.

Mr Crozier added: "The changes agreed today mean that Royal Mail can now take advantage of the unique opportunity to modernise the business provided by the GBP 1.2 billion funding package agreed with our shareholder, the Government – a package which will give us the best prospects of succeeding in an increasingly tough market.

"Change is always difficult for everyone but it is vital if Royal Mail is to be able to thrive in the competitive market and build a successful future. I know that that if we all work together we can achieve that success.

"Once again we would like to apologise to our customers for the problems they have experienced because of the industrial action."