Royal Mail pension deficit will not be rescued by privatisation

Privatisation will not help the multi-billion pound Royal Mail pension deficit, according to pensions experts.

Earlier this week, business secretary Lord Mandelson warned that if part-privatisation did not go ahead, staff may have to see the value of their pension slashed in half.

Ministers will vote on whether to part-privatise the postal services firm in the House of Lords tomorrow, although it is expected more than 125 Labour MPs will widely oppose the move.

However, pensions experts said the issue of privatisation was separate to paying off the pensions deficit, and the taxpayer would be likely to bear the burden, regardless of privatisation.

John Ralfe, a pensions consultant, told Personnel Today: “Lord Mandelson is saying part privatisation solves the pension problem. The operating problems and the pension problem are there, come what may.”

The decline in posted letters and organisational inefficiency are the main problems for the Royal Mail, according to Ralfe. The dramatic fall in stock market values over the past 18 months had lead to the increase in the pension deficit, which could be around £9bn, he added.

Ralfe said such a large deficit meant a private buyer would be unlikely to buy part of the Royal Mail unless the government took on the pensions liability, as recommended in an independent study published last December by Richard Hooper, a former deputy chairman of Ofcom.

David Blake, director of the Pensions Institute, agreed the government would need to take on the pensions deficit to find a buyer.

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