Royal Mail pensions 'will be safe'

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Royal Mail's pension plan is "huge and volatile", peers were told as the Government sought to allay fears that members' contributions would not be protected if the service is privatised.

Lord De Mauley, the Government's business spokesman in the Lords, said the total liabilities of Royal Mail's pension plan total £34.4 billion.

He said the scheme's deficit has reached £8.4 billion - which is "completely out of proportion to the size of the business".

To privatise Royal Mail successfully, the liabilities will be transferred to a public plan.

Speaking in the Lords, Labour's Baroness Drake told peers amendments need to be made to the Government's Postal Services Bill to make sure those affected are kept up to date about changes.

She later withdrew her demands after Lord De Mauley said the Government has already put in place measures to protect the pensions pot.

He said: "The deficit in the Royal Mail pension plan is huge and volatile. As at March 31, 2010, it amounted to £8.4 billion and the total liabilities in the plan amounted to £34.4 billion. So this pension burden is completely out of proportion to the size of the business."

He added: "We propose that responsibility for the deficit will be removed from the business by the transfer of the historic liabilities to a new public pension scheme. These proposals will safeguard the pensions benefits accrued by members. Member protection is paramount and is prominently on the face of the Bill."

Lord De Mauley said there is very little difference between the coalition's approach and Labour's when it was in power although the party is now opposed to full privatisation.

The Government insists that privatisation is the only way to ensure Royal Mail will continue to provide a universal service across the UK.