Royal Mail said it will also hike the price of its second class stamp from 36p to 50p.
Yesterday, Ofcom – now the postal regulator – said it would cap the cost of second class stamps at 55p, indexed in line with inflation, over the next seven years.
But Royal Mail will have the freedom to set its own prices for first class stamps and business mail.
Ofcom, which took over the regulatory role from Postcomm in October, said: “The sustainability of the UK’s universal postal service in the UK is at severe risk.”
Royal Mail has lost £1bn over the last four years, including a £120m loss in its letters business last year, due to a 25 per cent decline in mail volumes since 2006 thanks to the popularity of emails and texts.
But the number of delivery addresses has increased by about 300,000 a year, meaning postal workers are delivering less mail to more locations.
Moya Greene, chief executive of Royal Mail, said: “[Our] service is under threat from declining volume, e-substitution and ever increasing competition.
“Because of these pressures... the sustainability of the service is now at risk. Price increases are needed to return... to sustainability.”
Royal Mail said it “broadly welcomes” the price caps announced by Ofcom, and said it had been pushing for a change from its previous regulator, which “kept prices artificially low” and “accelerated the significant rate of decline in Royal Mail’s finances”.
The national mail carrier delivered 16bn letters to around 28m addresses last year, and said its 93 per cent next day delivery target is the highest of any European country.
Ofcom said any proposal to provide “end-to-end competition” in the UK – such as TNT Post’s bid to rival Royal Mail’s final mile delivery service – will be assessed on a case-by-case basis.