Taxpayers 'saddled' with £45bn bill to pay off Royal Mail pension bill due to mismanagement

[TrueBlueTerrier]

https://www.gbnews.com/money/pension-ta ... royal-mail

Royal Mail's pension scheme is understood to be costing taxpayers billions of pounds
Taxpayers have been slapped with a £45billion bill for Royal Mail's pension pots after mismanagement left the scheme with no cash to pay retirees.

The coalition Government took over most of the company's pensions in 2012 ahead of privatisation. Under the Conservatives and the Liberal Democrats, the scheme's assets were spent, The Telegraph reports.

This gold-plated scheme has already cost taxpayers £16.5billion since 2012, an average of around £3.8million a day, according to official data. Another £28.7billion needs to be paid before the scheme ends.

Taxpayers have been slapped with a £45billion bill for Royal Mail's pension pots after mismanagement left the scheme with no cash to pay retirees.

The coalition Government took over most of the company's pensions in 2012 ahead of privatisation. Under the Conservatives and the Liberal Democrats, the scheme's assets were spent, The Telegraph reports.

Since the early 2000s, Royal Mail had been facing business issues due to online communication becoming more popular than posting letters.

In 2010, the coalition Government began making the argument for privatisation. Two years later, Royal Mail was separated from the Post Office.

In order to prepare for this, the Government took on responsibility for the Royal Mail Pension Plan's deficit and most of its pensions in April 2012.

As a result, retirement payments accrued up to this date were transitioned into the newly created Royal Mail Statutory Pension Scheme.

Despite this, ministers did not use the pot's funds to make investments for future retirement payments. Parliament has since voted on the amount needed each year. Pensions are then paid in full, leaving the taxpayer to foot the bill.

Neil Record, a former Bank of England economist, explained: "The Government promised index-linked pensions to a large group of employees, then took the £29billion that sat in the pension fund and spent it.

"Out of the blue, a new unfunded liability of approximately £50billion emerged solely to allow the Government to sell off the Royal Mail.

"That £50billion is saddling future taxpayers with the obligation to repay this debt."

As of today, the scheme is closed with no one else being able to join and no more contributions are added but it will continue as long as members draw out pension payments.

From 2012-13 to last year, the cost of the scheme has jumped from £1.2billion to £1.6billion last year. The scheme forecasts that this will rise to £1.7billion this year.

Some 204,000 retirees are already receiving payments from the scheme with an additional 145,000 have built up pensions and are still working.

Pension claimants are rewarded with guaranteed, inflation-linked income for life.

Royal Mail's privatisation began in 2013 and was completed by 2015. Current workers are members of the Royal Mail Pension Plan.

Employees have earned contributions towards retirement pots, rather than final salary pensions, since 2018. The scheme's latest valuation showed a surplus of over £1billion.

In October last year, the company became the first in Britain to offer a collective pension fund. This model is similar to those used in Canada and Denmark.

Royal Mail is currently in the middle of a takeover bid from Czech billionaire Daniel Kretinsky.

[robking]

Why are GB News reporting this as if it's something new?
This is the RMSPS pension scheme they're talking about, it was well covered in the news when it all happened 14 years ago! even if RM was never privatised, as it was a state run enterprise, the taxpayer would always have been liable for that pension deficit.
What are GB news going to complain about next? the cost of the Boar War maybe.

[Basildon Bond]

https://www.gbnews.com/money/pension-ta ... royal-mail

TrueBlueTerrier, I'd recommend NOT posting any "news" that GB News publishes. Load of rubbish. Nothing against their political position etc. Free country and all that. It's just that they tend to pump out articles without checking sources or official reports just to have something on their site. And often they are wrong, mis-quote facts, or focus on something minor and inflate it when that fits their personal interests. I don't care if it appears in a search or an alert about Royal Mail. Much better sources if there is anything interesting or topical about RM.

[Jaggs]

https://www.gbnews.com/money/pension-ta ... royal-mail

TrueBlueTerrier, I'd recommend NOT posting any "news" that GB News publishes. Load of rubbish. Nothing against their political position etc. Free country and all that. It's just that they tend to pump out articles without checking sources or official reports just to have something on their site. And often they are wrong, mis-quote facts, or focus on something minor and inflate it when that fits their personal interests. I don't care if it appears in a search or an alert about Royal Mail. Much better sources if there is anything interesting or topical about RM.

This story has also been reported by The Telegraph but that is behind a paywall so no point linking to that.

[RobertT]

Why are GB News reporting this as if it's something new?
This is the RMSPS pension scheme they're talking about, it was well covered in the news when it all happened 14 years ago! even if RM was never privatised, as it was a state run enterprise, the taxpayer would always have been liable for that pension deficit.
What are GB news going to complain about next? the cost of the Boar War maybe.

The RM pension in all it's previous guises of POSSS, POPS, etc has always been managed by it's trustees and wasn't anything to do with the government until the company was floated on the stock market.
If the company hadn't been privatised, it would've still been liable for the deficit.

The only other way it would have been bailed out, was if the company went bust and the pension fell into the hands of the Pension Protection Fund, which would be an absolute last resort for the members of any pension scheme.

[Tman]

TrueBlueTerrier, I'd recommend NOT posting any "news" that GB News publishes. Load of rubbish.

There's links to various SWSWSW publications and releases, Morning Star on-line, the Guardian, BBC etc so why not?
Putin likes to ensure only one side of any debate or issue is publicised, but democracies should be better than that.

[TopperGas]

Why are GB News reporting this as if it's something new?
This is the RMSPS pension scheme they're talking about, it was well covered in the news when it all happened 14 years ago! even if RM was never privatised, as it was a state run enterprise, the taxpayer would always have been liable for that pension deficit.
What are GB news going to complain about next? the cost of the Boar War maybe.

The RM pension in all it's previous guises of POSSS, POPS, etc has always been managed by it's trustees and wasn't anything to do with the government until the company was floated on the stock market.
If the company hadn't been privatised, it would've still been liable for the deficit.

The only other way it would have been bailed out, was if the company went bust and the pension fell into the hands of the Pension Protection Fund, which would be an absolute last resort for the members of any pension scheme.

Would it still be in deficit given the way stock markets have risen in recent years? I'm surprised the Government haven't asked for some of the surplus from the present fund to be paid to them, rather than it seems allow DK to have some of the surplus.

[Jaggs]

Why are GB News reporting this as if it's something new?
This is the RMSPS pension scheme they're talking about, it was well covered in the news when it all happened 14 years ago! even if RM was never privatised, as it was a state run enterprise, the taxpayer would always have been liable for that pension deficit.
What are GB news going to complain about next? the cost of the Boar War maybe.

The RM pension in all it's previous guises of POSSS, POPS, etc has always been managed by it's trustees and wasn't anything to do with the government until the company was floated on the stock market.
If the company hadn't been privatised, it would've still been liable for the deficit.

The only other way it would have been bailed out, was if the company went bust and the pension fell into the hands of the Pension Protection Fund, which would be an absolute last resort for the members of any pension scheme.

Would it still be in deficit given the way stock markets have risen in recent years? I'm surprised the Government haven't asked for some of the surplus from the present fund to be paid to them, rather than it seems allow DK to have some of the surplus.

An interesting question. Global stock market indexes have had annualised return of 8% - 10% in that time which would have covered the outgoings of 1.2 to 1.6 Billion per year and also seen the fund grow in size. Whether that is how things would have been invested or I've taken an overly simplified view of what might have happened

[RobertT]

Most DB pension schemes used to be heavily invested in equities, but many got their fingers burnt in the past and now invest mainly in bonds/gilts, which are basically government debt. They do that because bonds generally provide steady returns and are less volatile than equities.

Up until the last 2-3 years many schemes were in deficit as a result of previously investing in equities, and sponsoring employers often paid in extra money on top of their normal contributions to try and reduce those short falls.
RM used to do the same before 2012.

But these last few years has seen bond yields increase, which has had the effect of not only reducing deficits but turning a lot of them into surpluses. Meaning around 90% of DB pension schemes are now in surplus and that money is seen as easy pickings.

I don't know what the financial situation of the RMSPS would be, if the government hadn't turned it into an unfunded public sector scheme. But had it followed the same investment principles of the majority of DB schemes, logic says it would be in a better situation than it currently is.

It's worth noting all the unfunded public sector pension liabilities, which include NHS, teachers, police, firefighters, etc come to a total of around £1,300 Billion. So the RMSPS is a small percentage of the total.

[TrueBlueTerrier]

TrueBlueTerrier, I'd recommend NOT posting any "news" that GB News publishes. Load of rubbish. Nothing against their political position etc. Free country and all that. It's just that they tend to pump out articles without checking sources or official reports just to have something on their site. And often they are wrong, mis-quote facts, or focus on something minor and inflate it when that fits their personal interests. I don't care if it appears in a search or an alert about Royal Mail. Much better sources if there is anything interesting or topical about RM.

I agree that I don't trust them. However, we should present all views,, whether we agree with them or not, and leave it to the reader to decide whether they are authentic or accurate. This would also allow people who disagree with them to challenge them.

I would rather have a free press that gets it wrong, rather than do it the trump way and ban those whom he sees as "Fake Media"