UK - Royal Mail has warned it may be forced to close its £20bn (€22.98bn) defined benefit (DB) scheme if the government's plans for a part-privatisation of the company fail.

The company admitted that while it is not something it "wants to consider" it may have no choice if the government does not go ahead with plans to take responsibility for the historic deficit in the DB scheme.

The comments follow the publication of an MP's briefing note by the Communication Workers Union (CWU) last week, ahead of its annual conference, in which it warned it planned to campaign against the passage of the Postal Bill regardless of "whether or not the government is able to secure an actual sale of Royal Mail shares in the next few months".

In the note, the CWU claimed the government should rethink its policy of selling a 30% share of Royal Mail to a strategic partner as the recent offers for the stake - £2bn from CVC and £1.7bn from TNT - are below the government's estimated target of £3bn.

It argued the government's assumptions behind the 'part-privatisation' policy are "out of touch with the real state of the postal market", and instead suggested effective legislation to address problems faced by Royal Mail and the industry could be passed "if the elements of privatisation are removed".

The CWU added: "In the absence of such a move, the CWU will support a vote against the Bill at its second reading, and subsequently."

However, a spokesperson for Royal Mail said: "Closing the final salary pension scheme is not something we would want to consider, but we might have to as one of the possible consequences of the government deciding not to go ahead with their plans, including their proposals to take responsibility for the historic pension deficit."

The pension plan has already undergone a range of reforms, including closure to new members from 31 March 2008, however latest figures from Royal Mail's annual report for 2008-09 showed the deficit had more than doubled to £6.77bn. (See earlier IPE article: Royal Mail pension deficit nears £7bn)

Under the Postal Services Bill the government proposes to take responsibility for around £29.5bn of RMPP liabilities and leave "sufficient" assets in the RMPP to service the remaining £3bn of liabilities, although not on a fully-funded basis. (See earlier IPE article: Gov't admits it will not leave RMPP fully funded)

But in its briefing note the CWU highlighted some concerns regarding the government's proposed treatment of the pension liabilities, expected to be placed in a new pay-as-you-go scheme, in particular it claimed plans to "fragment the scheme, take all of the funds assets with no guarantees for postal workers remains an issue of genuine concern" and called for "immediate negotiations" on the issue.

The Postal Services Bill has completed its passage through the House of Lords and has had its first reading in the House of Commons, although a date for the second reading and first debate on the issue among MPs, has not yet been set.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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