Cause for concern' as Royal Mail plans to ditch final salary pensions

6 January 2017

The Royal Mail has unveiled plans to ditch its final salary - defined benefit (DB) - pension plan from 2018, a move that has been met with criticism from unions.

The proposal, which will affect the 90,000 members of the Royal Mail Pension Plan, will see staff switch to a defined contribution (DC) plan. The new pension means workers have no guarantee about the payments they will receive in retirement, as unlike DB pensions, which are based on your final salary - what they get in retirement will be based on their own, as well as The Royal Mail’s contributions. 

Royal Mail says it will be unable to afford the cost of the current scheme in the long-term. It adds that it currently spends £400 million a year on the scheme but says this will rise to an unaffordable £1 billion annual contribution by 2018.


A consultation on the proposals runs until 10 March 2017 and workers are being encouraged to respond. The Royal Mail says no changes will take place until April 2018, and that retired members will not be affected.

Unite, the largest union in the country, says it and other unions are in talks with The Royal Mail but it has refused to rule out strike action at this stage.

Brian Scott, Unite officer for the Royal Mail, says: “This is a cause for concern to Unite and we will be looking to mitigate the impact of any proposed changes during and after the consultation process.

“We will also be strongly encouraging our members to participate in the consultation process.

“The consultation is complex and the company needs to ensure that its employees, our members, clearly understand the potential impact on them, and the reasons and justification for the proposed changes.”


Jon Millidge, Royal Mail group HR director, says: “We know how important pension benefits are to our people. We are sorry that their current arrangements will soon not be affordable. We believe our proposal would be a fair outcome; it is the best option available.

“It is a very competitive pension package compared to the industry and other large employers. It is about continuing to provide sustainable, good quality pension benefits and as many high quality jobs as possible. We will carefully consider all viable options put forward by members or their representatives.”

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