Royal Mail plans to close pension scheme next year

The Royal Mail (LON:RMG) has announced plans to end its pension scheme next year, in a move contested by The Communication Workers Union.

The FTSE 100 company said that while the scheme is currently in surplus, it expects to run out in 2018 as the result of a contributions squeeze.

“Royal Mail has reviewed the consultation feedback received from members and its unions, the CWU and Unite/CMA,” the group said.

“This includes a proposal put forward by the CWU. Sustainability, affordability and security are the principles the Company employed when reviewing the consultation feedback.

“The Plan is currently in surplus but we expect the surplus will run out in 2018. The Company’s annual pension contributions are currently around £400 million.

“If no changes are made, the contributions could more than double to over £1bn in 2018. We have concluded that there is no affordable solution to keeping the Plan open in its current form.

“Therefore, the company has come to the decision that the Plan will close to future accrual on 31 March 2018, subject to Trustee approval.”

According to The Communication Workers Union, a 50-year-old working for the Royal Mail earning £25,000 a year who plans to retire at 65 would lose £4,392 a year.

The union issued a threat just moments after Royal Mail confirmed their plans to end the scheme from March next year.

Ray Ellis, the acting deputy general secretary, said: “Although Royal Mail’s own consultation exercise revealed massive opposition to the closure plan, the company has decided to ignore the views of its workforce and proceed with closure without consent.

“We will not stand by and watch the company abandon the pension promises it made at the time of privatisation which threatens our members with massive cuts to their future pension benefits and insecurity and poverty in retirement,” he added.

The company have since said that they are working with unions to find a sustainable and “affordable solution”.