Royal Mail plans to close defined benefit pension scheme next year

Royal Mail

Royal Mail has said that it plans to shut its defined benefit pension scheme next year, as a result of a contributions squeeze, the Independent reports.

The company, which is listed on the FTSE 100, said on Thursday that while the plan is currently in surplus, it expects it to run out in 2018.

The company’s annual pension contributions are currently around £400m but if no changes are made, the contributions could more than double to over £1bn in 2018, according to Royal Mail.

“We have concluded that there is no affordable solution to keeping the plan open in its current form,” the group said.

“Therefore, the company has come to the decision that the plan will close to future accrual on 31 March 2018, subject to trustee approval.”

Royal Mail said that it is working closely with the relevant unions on a “sustainable and affordable solution for the provision of future pension benefits” and that it would write to plan members once further decisions have been made.

Royal Mail reportedly wants members of its existing scheme to change to a defined contribution scheme, where staff pay into a fund with no guarantee of eventual income levels.

At the end of March, UK-based BMW workers making engines, Minis and Rolls-Royce cars voted overwhelmingly in favour of staging a strike over plans to close their final salary pension scheme.

Record low bond yields have pushed the liabilities of UK pension schemes up considerably over the last few years. BHS’s pensions scheme had a £571m hole when the high street retailer collapsed last year.