Royal Mail pension scheme to shrink to one-tenth of size under government proposals
UK - The UK government has confirmed it would split the Royal Mail Pension Plan (RMPP), reducing it to around one-tenth of its current size, in an effort to tackle the scheme's £8.4bn deficit.
The proposals, which come as part of the new Postal Services bill, would see the Royal Mail partially or fully privatised, while the Post Office would be turned into an employee-owned mutual.
In an effort to address the scheme's deficit, the government would split off - and take responsibility for - most of the liabilities, with the aim of leaving Royal Mail with a fully funded scheme.
A spokesman for the Department for Business, Innovation and Skills confirmed that plans would reduce the new, funded pension scheme one-tenth of its current size.
In a policy document presented to parliament, business secretary Vince Cable said this would result in a scheme more appropriate for a company of Royal Mail's size.
The document said: "Any government action to take on responsibility for the historic pension deficit will only take effect once it has been approved by the European Commission under state aid rules, as it will involve government support to a company operating in a competitive market."
Cable said Royal Mail would need to go further and faster to innovate.
He added: "Royal Mail is in a difficult position - there is no hiding from the facts: mail volumes falling, a multi billion pound pension deficit, less efficiency than its competitors and an urgent need for more capital at a time when there are huge constraints on the public purse."
Additional changes proposed in the bill would see communications regulator Ofcom take over from current regulator PostComm, as well as at least 10% of shares being awarded to Royal Mail workers should privatisation go ahead.
The trustees of RMPP had previously come to an agreement with Royal Mail over increasing contributions in an effort to tackle the deficit, which has already fallen from more than £10bn in 2009.