Royal Mail sees 'materially lower' risk from new DB/DC pension proposal

Royal Mail expects the overall cost of a new staff pensions plan to be fundable from its current £400m annual pension contribution.

The postal group proposed to offer staff the choice between a defined benefit scheme and a defined contribution scheme, set up as a new section of the Royal Mail Pension Plan and available for all plan members.

The Unite union is planning to hold a consultative ballot of its near-6,000 Royal Mail members on the proposal.

Royal Mail, which said it is one of few companies offering to replace one defined benefit scheme with another, will continue its total contribution of 15.6%, unchanged from the initial DB cash balance proposal, adding that it expects the overall cost of the proposal will be funded within its current £400m annual contribution.

The new DB and DC sections would replace sections B and C of the plan which will close to future accrual next March.

"Royal Mail believes that the risk to the company of the proposed DB cash balance scheme would be materially lower than under the current plan and is a manageable risk for us."

Unite confirmed the ballot will close on 7 August and that it would be making no recommendation to its members on the package.

Officer Brian Scott said: “We think it is important that Unite members have an opportunity to express an opinion on what is being put forward by the company.

“The latest position is an improvement from the original proposal and through our discussions we have achieved these improvements.

“One of the main developments is that we will keep the defined benefit pension scheme open and the lump sum approach being put forward will become a separate section of that scheme. This will reduce any adverse impact on members’ future retirement incomes.

“We have had many discussions with the company over the last few months and these have been difficult. However, the Unite negotiating team consider that what is on offer is the best achievable in the circumstances.”