Royal Mail scheme seen eyeing bonds
UK - The 12 billion-pound (18 billion-euro) deficit-hit Royal Mail Pensions Scheme could invest more heavily in fixed income amid a doubling of the group’s pension bill, reports have stated.
Trustees of the scheme, which in 2003 was discovered to have a 2.5 billion-pound deficit, are reported to be keen on reconsidering the fund’s exposure to equities. No one at the scheme was available for comment.
The Royal Mail group currently funds the pension fund’s deficit to the tune of 310 million pounds a year but recently said it would increase contributions to 450 million pounds.
The bill, however, could soar to 800 million pounds if the fund’s investment strategy were changed to rely more on bonds in a bid to clear the deficit in a shorter period than the intended 40 years.
According to ‘International Pension Funds and their Advisors 2004’, the fund’s allocation breaks down to UK equities (50%), overseas equities (27%), UK fixed interest investments (4%), overseas fixed interest (3%), index linked gilts (8%) and UK property (8%).
“Royal Mail Group has made real progress across its entire business in the first half of 2004-05.The business is changing - and for the better,” chairman Allan Leighton stated in the group’s interim report.
The report said Royal Mail has made a profit on its daily operations of 217 million pounds, compared to 55 million pounds in the same period a year earlier.
The Group, which has lost 1.7 billion pounds in two years, is now profitable, with a return on turnover of just 3%.