Royal Mail share price drops 3.6 per cent as it unveils new pension plan

Caitlin Morrison
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Royal Mail says it will build on a pension proposal from the CWU (Source: Getty)

Royal Mail's share price dropped 3.6 per cent by mid-afternoon today, after the postal group released an update on the future of its pension plan.

The company announced earlier this month it would be shutting its pension scheme next year, but it has been in talks with unions over a counter proposal.

A consultation on the future of the pension scheme came to an end on 10 March, and today, Royal Mail said it was still "looking at options for the accrual of retirement benefits" after 31 March 2018, when its scheme is due to close.

The options on the table include a defined benefit cash balance scheme that builds on a proposal put forward by the Communication Workers Union (CWU).

Royal Mail said this plan represented a "materially lower" risk to the company than the current plan does. "The company would also take steps to manage risk further through an appropriate investment strategy and a proportion of the company contributions would be held as a pension risk reserve for additional security," Royal Mail said.

The proposed scheme includes elements of a CWU proposal, Royal Mail said, "without some of the inherent risks to the company that, in our view, the CWU scheme would have created".

"We very much appreciate the care that the CWU applied to its proposal and we have agreed to meet them to discuss it further," the group commented. "However, at the moment we do not believe the CWU proposal, in its current form, meets the fundamental principles underpinning our 2018 Pension Review. These are: sustainability, affordability and security.

"We believe that the defined benefit cash balance scheme would be a fair proposal that compares favourably with the retirement benefits offered in our industry and by other large UK employers. We will continue to discuss the future of the plan with our unions CWU and Unite/CMA. We will write to plan members once more decisions have been made."

However, despite the fact the new pension plan is based on a CWU proposal, the union slammed Royal Mail's "closed-minded, idea redundant mentality".

"Royal Mail have released a press statement today which is both premature and arrogant. It is an example of the closed-minded, idea redundant mentality that the CWU are up against," said deputy general secretary (postal), Terry Pullinger.

"It beggars belief that the company really do consider that this mutant defined contribution proposal is in any way an adequate response to the work and imagination that the union have put into our wage in retirement scheme proposal.

"The CWU have pragmatically responded to the pension challenges of our time and do not believe that the concept of a wage in retirement defined benefit arrangement is dead. We have been growing intellectual and moral support for our efforts and we will not be deterred in our campaign to ensure dignity and security in retirement for our members. In the face of conventional wisdom, dogma and shareholder self-interest, we become more resolute and this negotiation is far from over."

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