Royal Mail is to close its defined benefit (DB) pension scheme to future accrual on 31 March 2018.

The £7.6bn (€8.9bn) Royal Mail Pension Plan is in surplus, but this was expected to run out next year, according to an update issued this morning by Royal Mail.

Employer contributions are set to hit £1bn a year, compared to the current level of £400m, “if no changes are made”, the company said.

However, workers’ unions have disputed the need to close and have threatened strike action, which would hit the UK’s postal service. In a statement issued this morning, the Communication Workers Union (CWU) said members of the scheme stood to lose more than £4,000 a year if they were switched to a defined contribution scheme.

“Although Royal Mail’s own consultation exercise revealed massive opposition to its closure plan, the company has decided to ignore the views of its workforce and proceed with closure without consent,” said Ray Ellis, acting deputy general secretary for postal workers at the CWU.

He added: “CWU has made clear that any attempt by the company to impose change without agreement will be met with the strongest possible opposition including a ballot for industrial action. We will not stand by and watch the company abandon the pension promises it made at the time of privatisation which threatens our members with massive cuts to their future pension benefits and insecurity and poverty in retirement.”

Brian Scott, officer for the Royal Mail at Unite the Union, said the closure was “a cause for serious concern for a hardworking and dedicated workforce”.

He added that “the important part will be the replacement scheme which we are in ongoing discussions about… We will study the implications of today’s announcement very carefully and consider all the options going forward. If we don’t achieve a satisfactory outcome, we can’t rule out an industrial action ballot on this issue.”

Royal Mail said it appreciated “how important pension benefits are to our colleagues” but maintained the scheme was not affordable in its current form.

“We continue to work closely with our unions on a sustainable and affordable solution for the provision of future pension benefits,” the company said. “We will write to plan members once further decisions have been made.”

The CWU has proposed a risk-sharing replacement scheme with a guaranteed payout and indexation linked to investment performance. The union has said the investment portfolio would be “aggressive” and equity-based, in contrast to the majority of UK DB schemes, which tend to be predominantly invested in fixed income.