Royal Mail PLC will freeze its Royal Mail Pension Plan, London, effective March 31, 2018, subject to approval by the trustee of the defined benefit fund.
The company launched a consultation with the 90,000 participants in the fund in January regarding its future. The £9.6 billion ($12 billion) fund has been under evaluation with trade unions as part of a 2018 review, following communication with participants in June 2016 stating the current fund “will soon not be affordable.”
Royal Mail said in a statement Thursday that the participant consultation phase ended March 10, and the company had reviewed feedback from participants and trade unions.
While the fund is currently in surplus, company executives expect this to run out next year. Royal Mail contributes around £400 million per year to the fund, and it has warned that, if no changes are made, these contributions could more than double to more than £1 billion in 2018.
“We have concluded that there is no affordable solution to keeping the plan open in its current form,” said the statement. “Therefore, the company has come to the decision that the plan will close to future accrual on 31 March 2018, subject to trustee approval.”
The statement said executives will continue to work closely with unions on a sustainable and affordable solution for the provision of future retirement benefits. “We will write to plan members once further decisions have been made,” said the statement. The Communication Workers Union condemned the decision by Royal Mail. In a statement on its website Thursday, it said the company's plans to transfer participants into “inferior money purchase alternatives” could see employees losing up to a third of their future benefits.
“Although Royal Mail's own consultation exercise revealed massive opposition to its closure plan, the company has decided to ignore the views of its workforce and proceed with closure without consent,” said Ray Ellis, acting deputy general secretary (postal) at the union, in the statement.
The CWU added it had made clear that any attempt by Royal Mail to impose changes without an agreement “will be met with the strongest possible opposition including a ballot for industrial action.”