Royal Mail and the Communication Workers Union (CWU) have reached an agreement on the future of the former's pension scheme and pay offer.
The main points agreed include an increase of 5.4% on basic pay and weekday overtime from 1 October. In addition, it is proposed that the company's final salary pension scheme will be closed to new members on 31 January 2008 and is to be replaced by a defined contribution (DC) scheme. A career average defined benefit scheme will also be introduced for existing employees from 1 April 2008. This group's pension pots, built up before 1 April 2008, will be protected, including keeping a link to final salary.
The CWU and Royal Mail have also agreed that the normal retirement age for staff would be increased from 60 to 65 years from 1 April 2010. Existing members will be able to take their pension built up before 2010 when they reach the age of 60 years. Pension accrued after 2010 will be paid on an actuarially reduced basis before the age of 65 years, or unreduced after that age.†
Adam Crozier, chief executive of Royal Mail, said: "All along, we have been clear that to become competitive, we needed flexibility to modernise and we needed to reform our pension scheme because the costs were crippling the company. Change is always difficult for everyone but it is vital if Royal Mail is able to thrive in the competitive market and build a successful future. I know that if we all work together we can achieve that success."
The CWU is now to ballot its members on the agreement.