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Trustees side with Royal Mail over DB reforms

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  • Trustees side with Royal Mail over DB reforms

UK - Royal Mail has confirmed it is pushing ahead with changes to its defined benefit pension scheme from April 1, following approval from scheme trustees and despite ongoing protest from its members.

The company announced the scheme would close to new members from March 31 2008, and although all pensions and benefits earned before April 1 will still be linked to final salary, Royal Mail confirmed benefits built up by existing members after this date will be based on a career-average salary.

Royal Mail said the final changes to the £23bn (€30bn) scheme, which were announced at the beginning of March, would go ahead after the company and the trustee signed a deed of amendment approving the changes to the pension plan.

It claimed the changes, which were announced after a formal consultation period and "extensive talks" with unions and employee representatives, had been agreed last year by both the CWU and Unite trade unions, as part of wider agreements on pay, modernisation and pension reform.

However, trade unions claim the consultation process was a "sham" as the proposals remained the same as those first announced in April 2007, and urged its members to reject the changes. (See earlier IPE story: Unions urge rejection of Royal Mail deal)

As a result, Unite the Union revealed last week 85% of Royal Mail managers had rejected the proposals, and warned further industrial action may be the next step if the firm refused to respond. (See earlier IPE story: Royal Mail managers reject pension deal)

The CWU union pointed out it has also balloted its members on the rejection of the plans, and will announce the results on April 1 2008, when the union's executive will be meeting "to consider its next steps" following Royal Mail's intention to "press ahead with unagreed pension reform".

However, Jon Millidge, interim group HR director at Royal Mail, said: "Changes are unavoidable given increasing longevity and the higher costs of providing the current pension plan - but Royal Mail remains committed to continue offering postmen and women the best pensions that the company can afford."

The key pension changes now agreed and approved by trustees include:

The plan will close to new members from March 31 2008. All pensions and benefits earned before April 1 2008 will be linked to final salary at the time of retirement.
From April 1 2008, benefits building up will be earned on a Career Salary basis.
A new defined contribution plan will be launched in April 2009.
New recruits joining the company after March 31 2008 will be able to pay into the new plan after they have worked for the company for a year.
Employees can continue to take their pension on reaching 60 but the normal retirement age will increase to 65 for benefits earned from April 1 2010.

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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