Christine Buckley, Industrial Editor
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Royal Mail fears that its finances are so bad that its pension fund trustees could put it into liquidation to pay off a £3.4 billion deficit.
The postal group has told unions in private that it is possible that the trustees could be legally obliged to demand that Royal Mail be wound up to pay the bill.
Executives are painting a bleak picture of Royal Mail's health, at a time when the company is embroiled in a row with unions over its plan to close its final-salary pension scheme, raise the retirement age from 60 to 65 and cut its contributions.
Unions have also been told that Royal Mail's profits for 2010-11 could be as low as £50million if present conditions continue. Executives say that the letters business has declined, with volumes dropping in competition with e-mails, internet advertising, other operators and customers trading down for services.
That is short of the amount envisaged a few years ago when Allan Leighton, the chairman, was trying a partial privatisation of the business by bringing in outside investment and giving the workforce a stake. He had predicted that the business would be worth £4 billion in that financial year.
Royal Mail's trustees, who meet on Thursday, are expected to back the proposed changes to the pension scheme from April 1, under which the business will cut its contributions from 30 per cent to 21 per cent, comprising 10 per cent for the deficit and 11 per cent for future pensions. At present the total annual cash contribution is £850 million.
However, the threats have yet to have any impact on employees. Postal managers have voted already by 85 per cent to oppose the changes in a consultative ballot and more than 150,000 postal workers are in the process of voting. It is expected that postal workers will reject the pension changes in a ballot that is due to close the day before the trustees' meeting. With unions and management seemingly at a stand-off, postal services are likely to be crippled by industrial action again, only months after the last wave of national strikes over pay ended.
Royal Mail has twice delayed the usual reporting of its financial figures. The latest figures published relate to the year ending in March last year and they show a profit fall of 34 per cent to £233 million. Since then the business has been hit by the worst industrial action in decades.
Paul Reuter, national official with Unite, the union that represents postal managers, said: “The unions actually want this business to be managed. We are very concerned about the state of it. We don't think that Royal Mail has the capacity or the will to work in a competitive environment.”
Mr Reuter said that he blamed the Government for appointing “Laurel and Hardy” to run the business, referring to Mr Leighton and Adam Crozier, the chief executive.
The clash over pensions comes as Royal Mail and the Government are facing a political backlash over the closure of 2,500 post office across the country. Ken Livingstone, the Mayor of London, is seeking a judicial review of closures in the capital.
The Government is conducting a review of the impact of competition on Royal Mail. The company is pressing to be released from some of the obligations set out in its licence.
Royal Mail said that it would not comment on its private discussions with unions.
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give me my contributions back to me so i can blow them while i am fit enough to enjoy them then live on the state if i still live long enough, still i understand the top managers are keeping thier final salary scheme, i could happily retire on Leightons bonuses from the last two yrs tomorrow though
gary, northants,
Here we go again, 1st it was pay then conditions and now pensions. When are the govt and british public going to wake up, the Post Office today is being run down on purpose to make it easier in cpl of years to sell it off.
We can all see this but we are battering our heads off a brick wall trying to make people sit up and take notice. As a humble postie I have seen the press blame us for all the PO woes we have been told we are over paid, underworked, lazy, lefties, greedy
None of which is true, as a postman I have no control over what the govt do or senior management
All the changes ie single later deliveries, reduced collections,
higher prices, branch office closures they are all managment ways to reduce costs to flat line us so we will be on our knees ripe for the taking.
At the same time I think am right in saying senior managers got £4.3 million in bonus alone last year
To me that says it all. Remember Pay peanuts you get monkey Pay truffles you get pigs (greedy)
john mcgregor, GLASGOW,
This mess has been caused by Royal Mail fat cats on massive bonuses Adam Crozier & Allan Leighton (Laurel & Hardy) and the pension trustees. It has been mis-managed for years at the cost of the postal workers.It speaks for itself that 85% of Royal Mail managers have already opposed the pension changes even before the postal workers votes have been counted ? Shame on the Royal Mail higher management. Who will you blame this time ? Lets see if Gordon Brown will tell Royal Mail managers and postal workers to get back to work and except the package on the table. Listen to the rest your party Gordon who revolted last time they know the truth whats going on at Royal Mail...
A.Goodman, Liverpool, Uk
Scare tactics.By saying "Pension fund trustees 'could sink Royal Mail' Royal Mailforcing postal workers to accept the new pension deal.Then blame the workers if the deal isn't accepted if anything goes wrong.
The blame should be put fairly and squarely on the Pension fund trustees who allowed 13yrs or so of mismanagement to occur.They should take the ultimate responsibilty.We have just been balloted over whether to accept the new pension deal,coincidence or what that Royal Mail should come out with this statement?
john, shrewsbury, uk
The number of letters being sent is shrinking because:
1. The post office employees are strike-prone and often of poor quality, making the service unreliable.
2. The massive post office closure programme means that people will seek alternative ways of communicating - if it ain't convenient, then they won't use it
3. The delivery and collection service has deterioirated to third-world level, making the service unreliable
4. The price of postage is rising faster than inflation and the charging system (by weight and size) is complicated. This represents poor value for the consumer
These are some of the real reasons that people are dumping the post office in droves.
Peter Jones, Chelmsford, UK
Time to bite the bullet on public sector pension liabilities. Whether on the public account or hived off into separate legal entities they cannot be afforded and legislation must be brought in to repudiate them.
Malcolm McLean, Bradford, UK
"Executives are painting a bleak picture of Royal Mail's health.." [with particular regard to pension fund defecits.] Is this situation the fault of anyone but management? Who else was in charge? Surely, if they sink, they sink. Isn't that the free market solution?
S. Barraclough, Huddersfield, W. Yorkshire
What a silly comment I just posted! Of course the true answer is to nationalise Royal Mail! Why hasn't that been thought of?
S. Barraclough, Huddersfield, W. Yorkshire