MPs approve taxpayer funding of Royal Mail deficit

[TrueBlueTerrier]

http://www.professionalpensions.com/pro ... il-deficit" onclick="window.open(this.href);return false;


Members of Parliament yesterday approved the Postal Services Bill, which includes relieving Royal Mail of its £10.3bn pension fund deficit.
The Bill was passed through the House of Commons yesterday evening representing the first time that legislation to enable Royal Mail to benefit from private capital has been approved by MPs.

It will now be considered by the House of Lords where it is scheduled to have its first reading today.

As part of the Bill the Royal Mail Pension Scheme will be relieved of its enormous pension deficit by the government - the deficit stood at £10.3bn as of 31 March last year on an actuarial basis.

Business secretary Vince Cable (pictured) said: "I am delighted that our proposals have passed through the Commons. Upon taking office the government realised it had to move swiftly to tackle the challenges facing Royal Mail and the Post Office to ensure the future of the important services they both provide. We're absolutely determined to secure the future of these two proud institutions."

In October last year the government announced it will set up a new public Royal Mail pension scheme - the liabilities of which would be met by the taxpayer (PP Online 14 October, 2010).

Part two of the Postal Services Bill - announced in Parliament on 13 October last year - enabled the Secretary of State to establish a new public scheme which will pay benefits to members who are or have been qualifying members of the Royal Mail Pension Plan.

This came after Richard Hooper - who conducted an independent review of the UK postal services sector two years ago - reiterated his view the government should take responsibility for the Royal Mail's pension deficit (PP Online 10 September, 2010).

In May last year, the Postal Services Bill was met with controversy as it proposed the government transferring about £29.5bn of existing RMPP pensioner liabilities to the new public scheme and receive £23.5bn of the scheme's assets in order to "partially offset" the cost of the move (PP Online 11 May, 2009).


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[cyclemech1]

I don't get it!
Surely if we have 20odd billion in assets in OUR pension fund, it would be better to keep paying the pensions from the income earned from those assets and then when (or if) the fund becomes broke (in god knows how many years time) the Government then takes over the funding of the pension payments for those (much fewer) members that are still alive.
The way I read it, the Government takes OUR assets, sells them off (to their business friends) and saddles the taxpayers of this country with paying our pensions for the next 50 years!
Is this right or have I missed something?

[RobertT]

The way I read it, the Government takes OUR assets, sells them off (to their business friends) and saddles the taxpayers of this country with paying our pensions for the next 50 years!
Is this right or have I missed something?

The way i read it, is that it doesn't actually say that, but reading between the lines it could well mean it.
But then again it says there is a £10.3 billion deficit, liabilities of £29.5 billion and 23.5 billion in assets. I'm no Carol Vorderman but surely that's a deficit of £6 billion.

[fishtank]

If you offer any Government £23.5Billion in assets and in return they only have to fork out £800million a year they will bite your hand off.
If you offered me it i would bite your feckin hand off.
Governments last 1,2 or 3 terms if they are really lucky...how long term do you expect them to think?

[britwrit]

So, how isn't this a nationalization (i.e. seizing) of the whole pension scheme?

[TrueBlueTerrier]

So, how isn't this a nationalization (i.e. seizing) of the whole pension scheme?

It is:

As Billy and Dave have said they are Nationalising the Debt and Privatising the Profit

[fishtank]

Does anybody know if the Royal Mail Senior Executives Pension Plan (RMSEPP) will also be "Nationalised".

[heapsy]

Another Maxwellesque pension robbery by any chance? Evereybody, including managers, should be extremely concerned about this.

[BELIAL]

Another Maxwellesque pension robbery by any chance? Evereybody, including managers, should be extremely concerned about this.

You're assuming they can read and comprehend

[heapsy]

Another Maxwellesque pension robbery by any chance? Evereybody, including managers, should be extremely concerned about this.

You're assuming they can read and comprehend

Oops... sorry

[nataddick]

An interesting update on the pensions position. However, I am not conviced that the Bill will have an easy passage through the House of Lords and the major obstacle for the Government is the whether the EU determine that transferring Royal Mail's pension scheme off balance sheet is deemed state aid. The Government need state aid approval and if they get it - there is a strong possibility that a condition of approval is that Royal Mail will have to be split up and some parts of the business sold off. The rationale being that it is state aid to Royal Mail would be against competition rules in the same way that the banks had to sell of some businesses in return for a Government bail outs during the banking crisis.

So we as employees could end up with a minimum 10% stake in a business which we know will exclude the Post Office as it will be a mutual and it is likely GLS our european parcel business and the most profitable part of Royal Mail (based on turnover) will be sold off maybe along with Parcelforce - leaving us with 10% of letters!!

For those interested - here is the link to the Government's own site about the Postal Services Bill
http://services.parliament.uk/bills/201 ... vices.html" onclick="window.open(this.href);return false;

As I understand it, the Bill was due to have a second reading yesterday 25th but it may have been delayed due to the extended debate over the Alternative Vote. Watch this space.