UK – Royal Mail has seen a more than £3bn (€3.5bn) turnaround in its pension fortunes after the UK government assumed responsibility for the majority of its liabilities.
According to the company’s 2012-13 annual results, it saw an IAS 19 deficit of £2.7bn transformed into a nearly £830m surplus after the government relieved it of its past pension liability stemming from the Royal Mail Pension Plan (RMPP).
The transfer of assets from one of the country’s largest pension funds proceeded as part of a plan to privatise the currently state-owned firm.
The annual report said: “This transfer left the RMPP fully funded on an actuarial basis, and, by using long-term actuarial assumptions agreed at that date, it was predicted the company would have to make no further deficit cash contributions to RMPP.”
Discussing the transfer, effective 1 April 2012, it added: “The structural legacy issues relating to pensions and the regulatory framework have been resolved, and the group’s revenues, profits, margins and cash flows have all improved.”
The transfer was at the time described as “short-sighted and dangerous”, as the assets associated with the plan – ignoring the associated deficit – were described as a “windfall” for the UK Treasury, responsible for payments from the Royal Mail Statutory Pension Scheme.
Additionally, the company confirmed an arrangement that would see them address underfunding in the Royal Mail Senior Executives Pension Plan.
Royal Mail said it would stand by a £10m per annum deficit reduction payment until March 2018, in addition to a £19m one-off payment prior to the end of the reporting period.
It also placed £20m into an escrow account to give the scheme more security should it fail to tackle its deficit.
The Pensions Regulator previously recommended the arrangement as a means of avoiding the overfunding of occupational schemes.