Royal Mail is consulting on closing its Defined Benefit (DB) pension scheme for its staff. Originally announced in August 2016, could impact 90,000 employees.
As of 31 March 2016 the DB scheme reported a surplus of £1.77bn with assets of £7.44bn and liabilities of £5.67bn.
However it is forecast that the costs of running the DB scheme are set to more than double in 2018, and this has made management rethink the benefits of running it.
Royal Mail now estimates that its contribution rate would increase from 17% of pensionable pay to more than 50% by April 2018, and will cost £1bn or more every year. The cost is a lot more than the £290 million profit that the postal operator generated in the financial year 2015/16 in an increasingly competitive market environment.
The plans would see active members on the Royal Mail DB scheme transferred onto a new defined contribution (DC) scheme on the 31st March 2018. Each would be granted a £750 one off payment that could be put into the DC fund or taken by them as cash.
The new consultation is to run in tandem with a 2018 pension review process that involves Royal Mail and its unions, the Communications Managers Association and the Communications Workers Union.
Royal Mail’s Human Resources Manager Jon Millidge has said that the proposal offers a fair solution that balances member security and good quality benefits.
“We know how important pension benefits are to our people,” he said. “We are sorry that their current arrangements will soon not be affordable. “We believe our proposal would be a fair outcome; it is the best option available. It is a very competitive pension package compared to the industry and other large employers.
“It is about continuing to provide sustainable, good quality pension benefits and as many high quality jobs as possible. We will carefully consider all viable options put forward by members or their representatives.”
CWU deputy general secretary for postal Terry Pullinger said the union was prepared to take industrial action if the company acted against its members’ interests.
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