Royal Mail to close final salary pension fund

The Royal Mail said on Thursday that it would close its final salary pension scheme to new members from the end of this month.

The Royal Mail’s pension scheme is the UK’s largest corporate pension scheme by membership, with 45,000 members. But longer life expectancy and a sharp rise in pension costs has forced the state-owned postal group, which lost its 350 year monopoly on postal services in 2006, to close the scheme.

The proposal to close the pension scheme, which has a 5 billion pound deficit, to new members was initially bitterly opposed by workers and prompted them to strike, but was subsequently agreed with unions as part of a wider agreement on pay and modernisation.

From April 1 the pension scheme will move to benefits based on the average earned by employees during their career, rather than their final salary.

Royal Mail will launch a new defined contribution salary scheme in April 2009.

Postal workers will continue to take their pension from the age of 60 until April 1, 2010 when the retirement age will rise to 65.

After that date it will be possible for postal workers to draw a pension at the age of 60 on benefits they accrued before April 1, 2010 while continuing to work until they reach the maximum level of benefits, Royal Mail said.