Postal organisation Royal Mail has confirmed that it will close its defined benefit (DB) pension scheme to future accrual.
The organisation will close the Royal Mail pension plan to future accrual from 31 March 2018, subject to trustee approval.
The closure follows a consultation process, which formed part of the organisation’s 2018 Pensions Review. The consultation ran between 5 January 2017 and 10 March 2017, collecting feedback from the 90,000 members of the DB scheme, as well as trade unions such as the Communication Workers Union (CWU) and the Unite Communication Managers Association (CMA).
The consultation proposed moving current DB members into a defined contribution (DC) arrangement, either as a new section of the DB plan or by joining the Royal Mail DC pension scheme. As of 31 March 2018, the consultation also proposed that active members of the DB scheme would receive a one-off £750 payment, which could be contributed to their DC pension or taken as cash.
The DB scheme is currently in surplus, however, Royal Mail expects this to run out in 2018. The organisation’s annual pension contributions are approximately £400 million, but Royal Mail predicts this will increase to more than £1 billion in 2018 if no changes are made to the scheme.
Trade union CWU proposed an alternative option of a defined benefit wage in retirement scheme (WINRS) as part of the consultation process. The union estimates that affected employees could lose up to a third of their future pensions due to the proposed pensions change.
Royal Mail closed its DB pension scheme to new members in April 2008, and its DC scheme currently has more than 40,000 members.
A spokesperson at Royal Mail said: “We have concluded that there is no affordable solution to keeping the plan open in its current form. Therefore, the [organisation] has come to the decision that the plan will close to future accrual on 31 March 2018, subject to trustee approval.
“We know how important pension benefits are to our [employees]. We continue to work closely with our unions on a sustainable and affordable solution for the provision of future pension benefits. We will write to plan members once further decisions have been made.”
Ray Ellis, acting deputy general secretary, postal at CWU, added: “Although Royal Mail’s own consultation exercise revealed massive opposition to its closure plan, the [organisation] has decided to ignore the views of its workforce and proceed with closure without consent.
“CWU has made clear that any attempt by the [organisation] to impose changes without agreement will be met with the strongest possible opposition including a ballot for industrial action. We will not stand by and watch the [organisation] 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.
“Instead of provoking a dispute by acting without agreement and closing the scheme without consent, we urge Royal Mail to withdraw its plans and enter into serious talks with the CWU to introduce our new WINRS scheme to guarantee all its employees a decent wage and security in retirement.”
Brian Scott, officer for the Royal Mail at Unite, said: “This is a cause for serious concern for a hardworking and dedicated workforce.
“The announcement is to close the two current sections at the end of March 2018 and the important part will be the replacement scheme, which we are in ongoing discussions about. The Royal Mail pension plan (RMPP) is not closing in its entirety as the replacement pension scheme will embrace part of that. It is very likely that it will still be a different form of the current defined benefit scheme.
“We will study the implications of today’s announcement very carefully and consider all the options going forward. If we don’t achieve a satisfactory outcome, we can’t rule out an industrial action ballot on this issue. We will be consulting our members closely on the next steps in the coming days and weeks.”