Patrick Collinson and Sarah Butler 

Unions threaten battle with Royal Mail over pension scheme change

Communication Workers Union says they will explore every avenue to defend postal workers’ current pension plan
  
  

Royal Mail worker
Royal Mail is planning to switch 90,000 workers out of current pension scheme to one which will pay lower benefits. Photograph: Stefan Rousseau/PA

Royal Mail is facing a battle with its 140,000 workers after unions threatened a campaign of action against plans to slash pension benefits.

Royal Mail’s plan to switch 90,000 workers out of their current pension arrangements into a new scheme that will pay out lower benefits emerged on Wednesday. If the cuts are similar to plans at the Post Office’s near-identical pension scheme, it could see some workers lose up to half their projected pension.

The Communication Workers Union (CWU), which represents most of Royal Mail’s workforce, said it overwhelmingly rejected the pension changes.

Terry Pullinger, CWU deputy general secretary, said: “It is unfortunate that Royal Mail’s actions have resulted in this issue being in the public domain prior to any formal consultation.

“The CWU do not accept that closure of the Royal Mail Pension Plan is inevitable and will explore every avenue to defend it. We will challenge any convenient leap by the employer to close the scheme and move the entire onus on to our members.”

Royal Mail said the cost of its pension scheme will balloon from £400m to £900m a year unless it cuts the scheme. It wants to prevent workers from building up any future entitlement to the current career average-based pension scheme, and switch them to a pension where the outcome is entirely dependent on stockmarket movements.

Pullinger added: “It is very concerning that the recent press articles, which have prompted this statement, give an impression of fait accompli. Royal Mail will need to bring far more imagination into these ongoing discussions and should be in no doubt that the CWU will use every means at our disposal to encourage the company to think again and secure an agreement that defends our members’ incomes and dignity in retirement.”

Royal Mail said an existing agreement runs out in March 2018 and it welcomed talks. In a statement it said: “We are committed to constructive, ongoing talks with our unions about the future of the plan after March 2018.”

The CWU is already engaged in a battle with the Post Office, which split from Royal Mail on privatisation in 2012, over changes to its pension scheme. It called a strike ballot over changes to the Post Office pension, and other working arrangements at crown post offices, and said it expects a resounding vote in favour of action.

Severe cracks are appearing in many final salary-style pension schemes because what appear to be esoteric movements in gilt yields – interest paid on government bonds – are having a dramatic impact on the financial viability of pensions.

Since the EU referendum result, gilt yields have plummeted to historic lows, with interest rates on some government bonds turning negative.

This hits pension funds, as gilt yields are a major component in valuing the future liabilities of a scheme. Each time yields fall, the gap between assets and liabilities grows, throwing many schemes into deficit.

Figures earlier this week from the Pension Protection Fund revealed that the total deficit at nearly 6,000 of the UK’s biggest company pension schemes had widened by more than £24bn in a month to reach a new high of £408bn.

The latest rise in the deficit of schemes covered by the pensions lifeboat points to the difficulty in tackling troubled schemes including BHS, where former owner Sir Philip Green is battling to “sort” the problem, and Tata Steel, where a pensions restructuring could be key to a rescue bid.

The latest deficit estimate comes after a 31% rise announced last month in the wake of the Brexit vote but before this month’s decision by the Bank of England to cut interest rates to 0.25% and start pumping money into the economy.

A spokesperson at the Pension Protection Fund said: “Record lows in gilt yields continued to put pressure on pension scheme funding.

“Total liabilities increased in cash terms but the ratio of assets to liabilities is still above the all-time low of 76.4% in May 2012.”

 

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