UK says it won’t plug Royal Mail pension gap
UK – The Royal Mail pension fund will not be receiving a £2bn (€2.9bn) cash injection to help reduce its deficit, a spokesperson for the department of trade and industry told IPE today.
Press reports in the UK have suggested the government plans to contribute billions to help the postal operator fund its £4.25bn pension deficit.
“The story is not true. The government has not agreed to inject cash or give 20% of the shares to employees. It’s just speculation,” said a DTI spokesperson.
He added: “It will stay this way for the foreseeable future.”
Royal Mail refused to comment on reports that the government is due to give the scheme £2bn, most of which will be used to plug the deficit.
“Royal Mail doesn't comment on unsourced, speculative reports. The position is that it's not for the government to finance Royal Mail but for the regulator, Postcomm, to ensure that the business can fund its activities,” said a Royal Mail spokesperson.
Postcomm also declined to comment. A spokesperson added: “This is not our field. The £2bn has nothing to do with Postcomm. We are not in a position to confirm or deny these claims.”
The Royal Mail pension fund may need approximately £1bn a year to reduce its deficit and cater for existing pensioners in the face of increasing life expectancy, according to reports.
Royal Mail has suggested it may require £400m to plug its deficit, and approximately £350m for existing pensioners.
Royal Mail has also asked the regulator Postcomm to consider an additional amount for changing mortality rates, which some reports put at between £150m to £250m.
“People generally are living longer. This is having an impact on the pension fund. We will know the full impact when we get the next actuarial review, which will be conducted in March 2006,” the spokesperson stated.
Royal Mail did, however, state that it was committed to its pensioners.
“Royal Mail's pension scheme is based on final salaries. It remains open to new entrants joining the business. Royal Mail is determined to ensure the fund continues to meet all its obligations.”
The scheme’s deficit – which may climb to £6.25bn following the actuarial review – is the result of falling equity values and increased longevity.