Royal Mail to make 'substantial contributions' to tackle £8.4bn scheme deficit
UK - The trustee of the Royal Mail Pension Plan has reached an agreement with Royal Mail on funding that will involve "substantial contributions in excess of the current level".
In a letter to scheme members, Jane Newell, chair of the scheme, said an agreement had been reached on completion of the scheme's financial health check, which revealed a deficit of £8.4bn as at the end of March 2010.
The agreement between Royal Mail and the pension fund is now subject to a formal review by the UK Pensions Regulator (TPR).
Newell informed scheme members that TPR had so far been unable to carry out a detailed assessment of the scheme's latest financial health check.
"However," she said, "the provisional view from the regulator is that it has substantial concerns about both the deficit figure and other aspects of the agreement."
She pointed out that Ed Davey, UK minister for employment relations, consumer and postal affairs, had written to the trustee, stating there was a "clear priority commitment" from the government to pass legislation to address the deficit.
Paul Jayson, partner at Barnett Waddingham, lamented that responsibility for the "eye-watering" deficit could fall to future taxpayers if the scheme enters the Pension Protection Fund.
He questioned the fairness of Royal Mail scheme members getting a government guarantee, adding that they were not public sector employees and therefore "should not enjoy any better protection" than those in the private sector.
"It may not be fair," he said, "but is there really any other way? Royal Mail has never really been allowed to compete with other commercial operations without its 'public interests' handcuffs, and after all, what's another £10bn in the context of the UK's debt burden?"