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Last Updated: Friday, 5 October 2007, 09:52 GMT 10:52 UK
Royal Mail to shut pension scheme
A Royal Mail worker on strike in a north London sorting office
The pension changes may come into effect next year
The Royal Mail has proposed the closure of its final salary pension scheme to all members.

The company is offering existing staff a new scheme from April 2008 linked to "career average" earnings.

It also plans to raise the standard retirement age from 60 to 65, but only for pension earned after 1 April 2010.

The Royal Mail is in the throes of a strike by most of its other staff over pay, pensions and jobs, but managers have now agreed a deal on these issues.

New recruits to the Post Office, from 31 January 2008, will be offered membership of a separate "defined contribution" pension scheme.

"We will support it [the pension changes], rather than fight it," said Paul Reuter, national officer for the trade union Unite which represents Royal Mail managerial staff.

"It is the right thing to do given the state of the business. There will still be a link with earnings in the future," he said.

Unite had threatened to ballot its 12,000 Royal Mail members for strike action unless a satisfactory deal was struck, particularly over the pensions issue.

However, the Communications Workers' Union (CWU) said it would oppose the changes.

"We are definitely in opposition to the closure of the scheme," she said.

Agreement

The union's agreement with the Royal Mail was achieved after talks with the company last night.

HAVE YOUR SAY
I appreciate they do a lot of work but the strike could lead to more job losses
Kim Wood, Macclesfield

The Royal Mail first suggested closing the pension scheme, but to new joiners only, earlier this year.

The scheme has a huge deficit of 6.5bn, partly because the company belatedly increased its estimate of how long its staff would live after retirement.

It has already agreed to pay off this deficit over the next 17 years.

However, the normal cost of funding its pension scheme, which covers more than 160,000 staff, has risen in recent years from 12.4% of staff salaries to about 20%.

The proposed changes are designed to bring down this cost to the company.

Similar plans to close their final salary schemes to existing members have been put forward recently by the electronics group Siemens and by United Biscuits.

Consultation

The agreement of Royal Mail managers has been achieved partly because of a promise from the company that managers' bonuses, typically amounting to between 5% and 9% of salaries each year, will become pensionable under the new arrangements.

Mr Reuter said the same overall pension deal was also on offer to members of the Communications Workers Union (CWU), who are in the middle of rolling strike action at sorting offices across the UK.

"We are still in talks today and pensions form a large part of this," said the CWU spokeswoman.

Royal Mail is expected soon to start a formal 60-day consultation with its staff, a legal requirement, before the changes can be brought in.

"We are pleased to have reached agreement in principle with Unite," said a Royal Mail spokesman.

"As we have always made clear, proposals on pensions reform across the group will be fully consulted on. This consultation has yet to begin."

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