Tag: Royal Mail

Royal Mail has appointed a new chairman of its pension fund, currently facing a Pounds 2.5bn deficit. Jane Newell, a non-executive director of United Utilities and chairman of three other pension schemes, will lead the fund’s trustees as they try to solve its financial problems. Royal Mail’s pension hole is the result of the fall in the stock market in the late 1990s and the 13-year contributions “holiday” enjoyed by the group on actuarial advice. Actuaries discovered the deficit in March last year and Royal Mail faces payments of as much as Pounds 800m a year to keep the fund going. Ms Newell replaces Roy Chapman, chairman for the past 10 years, who is retiring at the end of the year. Royal Mail said the change had been planned for some time and was not linked to concerns over the size of the deficit.

Royal Mail faces the prospect of having to pay Pounds 800m a year to fill the hole in its pension fund that was revealed last year, the group announced yesterday. There was a contributions holiday at Royal Mail’s pension fund, the fifth biggest in the UK, from 1990 until 2003, when an actuarial report uncovered a Pounds 2.5bn deficit. The group said yesterday that current contributions of Pounds 310m a year would soon increase to Pounds 450m a year.
The trustees of the fund argue that even more than this should be contributed to clear the deficit within 12 years rather than a planned 40 years, and to reduce the reliance on equities.

The fund’s 80 per cent holdings in shares is too risky, it has said, and more cash should be invested in debt. These changes would push up the cost of covering the deficit, said Royal Mail, to about Pounds 800m a year for the next 12 years.