Royal Mail PLC Royal Mail 2018 Pension Review Update (0876L)
14 Juli 2017 - 9:00AM
UK Regulatory
TIDMRMG
RNS Number : 0876L
Royal Mail PLC
14 July 2017
14 July 2017
Royal Mail plc
ROYAL MAIL - 2018 PENSION REVIEW UPDATE
Royal Mail plc (RMG.L) is today providing an update on its 2018
Pension Review in respect of the future of the Royal Mail Pension
Plan (the Plan).
-- We have had extensive talks with our unions, Unite/CMA and
the CWU, on a sustainable and affordable solution for retirement
benefits for Plan members after 31 March 2018, when the Plan in its
current form will close to future accrual.
-- The Company is now offering members a choice between a) a
Defined Benefit scheme and b) a Defined Contribution scheme, set up
as new sections of the Royal Mail Pension Plan (the Plan).
-- The Company understands that Unite is planning to hold a
consultative ballot(1) of its members on this proposal, as it
believes that this is the best available deal for Plan members and
a significant improvement on the Company's original Defined
Contribution proposal.
-- Royal Mail has also offered this improved proposal to the
CWU, making it available to all Plan members.
-- The Company expects that the overall cost of the proposal
will be funded within its current GBP400 million annual pension
contribution. Royal Mail believes that the risk to the Company of
the proposed Defined Benefit cash balance scheme would be
materially lower than under the current Plan and is a manageable
risk for us.
What this means for the Company
At 15.6%, the total Company contribution would remain unchanged
from our initial Defined Benefit cash balance proposal. The Company
expects that the overall cost of the proposal will be funded within
its current GBP400 million annual pension contribution.
The Defined Benefit cash balance scheme and the Defined
Contribution scheme would be set up as new sections of the Plan.
They would replace Sections B and C of the Plan which, as
previously announced, will close to future accrual next March.
Royal Mail believes that the risk to the Company of the proposed
Defined Benefit cash balance scheme would be materially lower than
under the current Plan and is a manageable risk for us.
How the proposal would work
The Company is offering members the choice of joining either a
Defined Benefit cash balance scheme or a Defined Contribution
scheme. Royal Mail is one of few companies offering to replace one
Defined Benefit scheme with another.
From 1 April 2018, the Defined Benefit cash balance scheme would
provide members with a guaranteed lump sum at retirement. 97% of
members currently give up annual pension at retirement in order to
take a tax-free lump sum. Under the Company's proposal, there would
be less need - or even no need at all - for members to give up
annual pension to get a tax-free lump sum.
The Company contribution to members' retirement accounts would
increase from 12.6% to 13.6%, compared with the initial Defined
Benefit cash balance scheme proposal. The Company would contribute
a further 2% for other member benefits, including death in service
and ill-health. Members' retirement accounts would be credited with
19.6% of pensionable pay every year. This includes 13.6% from the
Company and 6% from members.
Plan members would also have the option of joining a new Defined
Contribution scheme as an alternative. The Company contribution
would be 13.6% of pensionable pay. For some members, this could be
a better option.
Improvements to the Royal Mail Defined Contribution Plan
In addition, as previously announced, Royal Mail is ready to
make improvements to the Royal Mail Defined Contribution Plan
(RMDCP). From 1 April 2018, we propose increasing the Company's
standard contribution by 1% in each tier, up to a maximum of 10%.
This would apply to all current and future RMDCP members. This
compares favourably with other large employers.
Notes:
1 A consultative ballot seeks members' views on a proposal but,
for clarity, is not a ballot for industrial action.
ENDS
Investor Relations:
Catherine Nash
Phone: +44(0)20 7449 8183
Email: investorrelations@royalmail.com
Media enquiries:
Peter Tilley
Phone: +44 (0)7841 803 316
Email: peter.tilley@royalmail.com
Rebecca Lum
Phone: +44 (0)7841 103 824
Email: rebecca.lum@royalmail.com
Royal Mail press office out of hours: 020 3338 1007
This information is provided by RNS
The company news service from the London Stock Exchange
END
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