The Royal Mail has stated that its defined benefit pension scheme is “still simply unaffordable”, the Evening Standard has reported.

Royal Mail boss Moya Greene has rejected the possibility that the UK’s recovering bond yields could rescue the company’s declining pension scheme.

The DB scheme is set to close as a result of costs; which have been predicted to double by 2018.

Greene said that she aims to avoid strikes despite threats from the Communication Workers Union a trade union representing 140,000 affected Royal Mail staff.

“The cash contribution required is just so huge that whether it’s £1.4 billion or £1.25 billion a year doesn’t make that much difference. It’s simply unaffordable,” Greene said.

“We’re having productive, cordial discussions with our unions. Strikes don’t help anybody,” she added.

Although growing bond yields have aided the scheme, pension costs lead to a 5 per cent decline in half-year pre-tax profits to £110m and shares fell by 4 per cent to 478p.

Royal Mail informed employees in June that the cost of keeping the plan open is “simply unaffordable”. It added that it could not continue to keep the scheme running in its present state beyond 2018 as it had previously promised.

At present, Royal Mail contributes an approximate £400m into its DB scheme which secures a pension based on employees’ average salary over their lifetime.

The Royal Mail is yet to respond to Pensions Age’s request for comment.

Share Story: