Earlier this month Royal Mail reserved over £90 million for its executive worker’s pensions – whilst the blue collar workers were asked to accept significantly lower benefits later in life.
The news comes ahead of its initial public offering of £3 billion on the stock exchange, and have increased tensions between management and the workforce.
Whilst the details in the latest report point to a “special” one off payment made to executives of £19 million (given to correct a deficit made by closing executives from future accruals), this is added to £8 million paid last year, £6 million in 2011, £20 million that has gone into an investment fund and £50 million in predicted annual cash contributions, according to The Sunday Times.
A valuation of the Royal Mail Pension Plan (RMPP) in March 2006 showed the scheme to have a deficit of £3.4 billion. The RMPP was consequently closed to new employees in early 2008, and an agreement with trustees was then launched to pay off the deficit in the prevailing 17 years.
Yet in March 2009 the deficit had grown to £10.3 billion; slightly lowered to £8.4 billion in the March 2010 estimate. Royal Mail and its trustees reached a new agreement to repair this over 38 years.
On 1 April 2012 amid increased tensions, the UK government transferred around £40 billion of Royal Mail’s historic liabilities from the RMPP to a new public sector scheme administered by the government.
Most recently, in May 2013, Royal Mail proposed a consultation to potentially reform of the scheme, saying that whilst the RMPP was more secure, it had not addressed the cost of accruing benefits.
What happens next?
These deficits and plans to change the pension scheme could significantly damage the government’s plans to list the postal firm, and is set to become a major political and industrial issue.
The Communication Workers’ Union said it would oppose any and all changes to pension benefits and pay outs by executive action.