Royal Mail’s pension deficit hits £8bn

Royal Mail’s pension deficit has now reached £8bn.

The figure published in the postal service’s annual accounts provides a snapshot of the pension fund’s position, but a full three-yearly valuation of the scheme, which is set to be published in the next two months, is expected to reveal an even bigger deficit.

According to the BBC, sources at the Royal Mail suggest the deficit could reach as much as £10bn.

Royal Mail has a legal obligation to make up the deficit so more money could be drawn out of the business to support the scheme.

The warning follows an announcement by the coalition government that it intends to part-privatise Royal Mail.

A source close to the issue said: “At the moment, the trustees with their actuaries are negotiating the financial repayment schedule the company will have to sign up to.

“But the government will not be able to sell the company with such a deficit.”

The annual accounts show Royal Mail paid a further £867m into the pension scheme in the last financial year, but this dwarfed both the company’s cash outflow of £517m, and the group’s pre-tax loss of £262m.

It is feared an increase in the existing level of deficit payments could push the company’s total funding bill for the scheme to more than £1bn a year.

In 2008 the final salary pension scheme was closed to existing staff, with employees instead offered a much cheaper career average scheme, and their retirement age was raised to 65.

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