UK government to tackle Royal Mail pensions deficit
UK - The Royal Mail defined benefit (DB) pension deficit is one of the areas that will be tackled by the Conservative-Liberal coalition government in a new Postal Services Bill announced in the Queen's Speech.
In the coalition document published last week, the government confirmed it was looking at the possibility of injecting "private capital" into the Royal Mail, in an attempt to restart the failed part-privatisation plans initiated by the previous government. (See earlier IPE article: Auto-enrolment still on track as new UK government rings changes)
The Department for Business, Innovation and Skills (BIS) had previously been unable to comment on the impact this could have on the pension scheme, which is expected to see the last actuarial deficit of £3.4bn (€3.98bn) in 2006 triple to around £10bn once the valuation for March 2009 is completed.
However details of the new Postal Services Bill announced yesterday stated the main elements of the forthcoming legislation would "seek to tackle the fundamental and longstanding problems facing Royal Mail". And alongside the ability to sell a stake in the company to a third party, the Bill will specifically include "measures to resolve the problems surrounding Royal Mail's pension deficit".
Vince Cable, secretary of state for BIS, said: "We need to deal with the longstanding problems facing Royal Mail - the dependence on finance from the taxpayer, the deficit in the pension fund, the dramatic decline in the number of letters being sent. These fundamental challenges are becoming more thorny and deep-rooted. Letting them grow is not in the best interests of consumers, businesses or Royal Mail's employees."
In a statement he confirmed the government department is "looking at all of the issues and options with a fresh pair of eyes, but are clear that an injection of private capital is important. As is making this work for employees by tackling the pension deficit and exploring opportunities to give workers a real share in the future of the company".
Meanwhile the Queen's Speech yesterday also laid the foundation for a new Pensions and Savings Bill, with the government confirming the purpose of the Bill is to "implement the findings of the review of the current timetable for increasing the State Pension age, if the review finds that the existing timetable is no longer appropriate". In addition it will aim to "ensure the future affordability of the state pension, including the restoration of the link between earnings and the basic state pension".
Anthony Arter, London senior partner and head of pensions at law firm Eversheds, pointed out most of the pension policy aims outlined in the coalition agreement were mentioned specifically in the Queen's speech. (See earlier IPE article: Queen's Speech: UK to review State Pension Age)
But he added: "It will be interesting to see what other issues are contained in the Pensions and Savings bill, in particular, will NEST survive in its current state or will it hatch into something else? We also wait with interest to see what, if anything is said about pensions issues in the Budget on 22 June."