OUTCOME OF MOST RECENT ROYAL MAIL PENSION PLAN VALUATION AND UPDATE ON 2018 PENSION REVIEW

[TrueBlueTerrier]

http://phx.corporate-ir.net/phoenix.zht ... ID=2270645" onclick="window.open(this.href);return false;

Royal Mail plc (RMG.L) today announces that the most recent valuation of the Royal Mail Pension Plan (the Plan) has been completed.

Under the assumptions used for the valuation, as at 31 March 2015, the Plan had assets of £6,153 million and liabilities of £4,451 million. Using these assumptions, the cost of benefits being accrued each year, based on market conditions at the end of March 2017, would currently be around £1.3 billion. This is significantly greater than the total annual contributions of around £400 million that the Company and employees make. Accordingly, we expect that the actuarial funding surplus would be exhausted during 2018 if the Plan had remained open in its current form. After this time, the annual cost would be more than double the current contributions, which, as we have pointed out to Plan members in a number of communications, is unaffordable for the Company.

In accordance with the new Schedule of Contributions, the Company contribution rate will remain at 17.1% of members' pensionable pay until 31 March 2018. Given the Plan was in surplus at the valuation date, no deficit correction payments are required.

Following Trustee approval, the Company confirms that the Plan, in its current form, will close to future accrual on 31 March 2018. We continue to work closely with our unions on a sustainable and affordable solution for the provision of pension benefits after 31 March 2018.

[daveyeff]

maybe they shouldn't have took a 13 year payment holiday then. their fault completely.

[TheTrolleyMan]

Snap

[fly-catchers]

Payment Holiday.. Would you have a saving account where you never put any money in it but took money out. And wondered one day where has all the money gone! DOH!

[RobertT]

The 13 year pension holiday took place between 1990 and 2003 and was a major factor in the ending of the final salary pension in 2008. Although to some extent it had to be taken due to legislation at the time, but it did last too long!

The investment strategy at the time was also a big factor in the FS closure, which was heavily biased towards equities. They took a big hit in the stock market crash, crystalised the loses and moved over to gilts/bonds because they were supposed to be safer. Basically doing everything you shouldn’t do.
Personally I invest in funds via pensions and ISA’s and saw a 40% hit on one of them at the time. I have put no more money into that particular fund and it’s currently around 40% up. If I can do things properly with my own money, why can’t those managing my money via the RM pension schemes, not do the same?

As part of the deal that enabled privatisation, in 2012 the government took over about £28 billion worth of RM pension assets, but around £38 Billion in liabilities! That part of our pension(RMSPS) is now effectively paid for by the taxpayer.

The RMPP from 2012 onwards is the responsibility of RM and has always been in surplus, but that’s going to run out in 2018.

The pension holiday helped to close the FS scheme. You could also argue that it helped to facilitate privatisation. But can you really say that it is the cause of the impending closure of the current DB scheme?
The main reason is poor investment choices! Along with increased life expectancy, etc.

Also, I believe the pension holiday only applied the Sections A&B. As the majority of current employee members of the RMPP are in Section C, you could argue that todays’ posties are paying for those who have long since left the business.

[jaxx]

I was lead to believe that Royal Mail`s contribution to the pension scheme was £400 million on top of our own contributions but according to that article the £400 million is ours and their contributions combined. So just how much has Royal Mail be paying in to the pension scheme.