The Royal Mail has posted a warning to 94,000 workers that the company’s final salary pension scheme is too expensive to run.
The company pays £400 million a year into the scheme, but has calculated by 2018, the cost of running the pension and paying benefits will be more than double that – at close to £900 million.
Directors committed to keeping the pension open until March 2018 on privatisation but have already told members that economic conditions will make staying open unaffordable.
The warning has set Royal Mail on collision course with unions, which have concerns that any changes to the scheme will mean fewer benefits and lower retirement payments.
The Royal Mail problem is just one of a series of final salary pension upsets embroiling FTSE companies in conflict with staff and unions.
QROPS for expats with pension worries
Already this year, thousands of workers have been caught in final salary pension disputes with failed retailers British Home Stores and Austin Reed.
Employee with Tata Steel also have an uncertain future due to the high cost of the company’s final salary pension scheme.
For expats heading for retirement who are worried that they may lose pension income and benefits as the result of companies dumping their final salary schemes, Qualifying Recognised Overseas Pension Scheme (QROPS) offer one solution.
Switching to a QROPS means picking up all the advantages of pension freedoms with the tax benefits of an offshore pension.
For example, a Malta QROPS can come with flexible access along the lines available with UK pensions – with the added benefit of low or no income tax for expats living in places such as Dubai, Qatar or Oman.
Tax and investment benefits
Malta and many other QROPS give expats a 30% tax-free lump sum. For a pension fund of £100,000 that’s a £30,000 tax-free rather than the £25,000 paid in the UK.
Withdrawals are also easier, with payments with no tax deducted made in a number of major currencies to avoid foreign currency exchange hassles.
Besides the opportunity to pay less tax and keeping more of your pension cash, QROPS also come with other benefits, such as more flexible investments, estate planning options and no caps on fund sizes.
Providing the fund size at transfer does not exceed the lifetime allowance limit of £1 million, a QROPS can grow to any size once offshore.