I am pleased to inform you that the Royal mail Pension Plan’s historic £8.4bn deficit is being addressed.
On Sunday 1 April 2012, the Government will take responsibility for most of the liabilities that have built up over the years until the end of 31 march 2012. I know how much you appreciate the valuable benefits the Royal Mail Pension Plan (RMPP) provides.
The transfer of the majority of the RMPP’s liabilities means that the Government is taking on direct responsibility for any pension earned by you up until the end of 31 March 2012. There will be considerably more security for your benefits as a result.
Today’s Courier explains the key things you need to know about what is happening and how it will affect you and the business.
Why was action necessary?
I know that some of you have had questions in the past about the security of your pension.
Our company has been in financial difficulty for some time. Because of the pension deficit, the company’s liabilities outweigh the value of its assets. Last year alone, Royal Mail Group contributed more than £700 million towards the combined cost of paying off the deficit and meeting the ordinary company contributions to the pension plan.
This major burden for the company has been a very significant risk to your pension, your future job security and Royal Mail Group. Without this action, the company would soon have run out of the cash it needs to keep the business going.
What happens now?
The Government will move most of the RMPP’s liabilities into a new Government scheme, the Royal Mail Statutory Pension Scheme (RMSPS), which will be separate from other Central Government-backed pension schemes.
This means that it is not affected by any changes the Government may make to future service benefits in other public sector schemes. The RMPP that remains will have much more manageable pension liabilities. The assets in the RMPP will match the liabilities on 1 April 2012.
The scheme will be fully funded at this point, which means that it will have no deficit. The remaining assets in the RMPP will transfer to the Government, which will own them and may choose to sell them in due course.
As with any other defined benefit pension scheme – and many companies are grappling with large deficits – there is no certainty that the RMPP will not fall into deficit in future. However, as I have said, the pension solution makes the plan much more manageable and puts us in a much stronger financial position.