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| Version 11 | Version 12 |
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| Mail pensions 'facing collapse' | Mail pensions 'facing collapse' |
| (20 minutes later) | |
| Royal Mail and its pension fund are in danger of collapse if ministers do not press ahead with part-privatisation, the pension scheme trustees say. | Royal Mail and its pension fund are in danger of collapse if ministers do not press ahead with part-privatisation, the pension scheme trustees say. |
| The trustees' chairman, Jane Newell, says the fund's deficit may be "significantly larger" than the £5.9bn estimated last year. | The trustees' chairman, Jane Newell, says the fund's deficit may be "significantly larger" than the £5.9bn estimated last year. |
| The deficit was identified last year in a review of Royal Mail as the main problem hindering the business. | The deficit was identified last year in a review of Royal Mail as the main problem hindering the business. |
| Plans for the postal service will be introduced in parliament on Thursday. | Plans for the postal service will be introduced in parliament on Thursday. |
| Ministers want to sell a stake of about 30% to the private sector to help pay for the modernisation of the service. | Ministers want to sell a stake of about 30% to the private sector to help pay for the modernisation of the service. |
| Deficit | |
| Adam Crozier, chief executive of the Royal Mail, told MPs he expected the pension fund's deficit to grow much larger at the next valuation of the scheme. | |
| The deficit... is highly unlikely to be affordable by Royal Mail, with potentially devastating consequences Jane Newell Read the trustees' letter in fullThe Hooper Review explained | The deficit... is highly unlikely to be affordable by Royal Mail, with potentially devastating consequences Jane Newell Read the trustees' letter in fullThe Hooper Review explained |
| "The deficit when revalued by the trustees will show a deficit of between £8bn and £9bn," he told MPs on the select committee for business, enterprise and regulatory reform (BERR). | |
| Earlier, Tim Brown, chief executive of the postal regulator Postcomm, told MPs that removing the pension burden from the Royal Mail would not solve all its financial problems. | |
| It would help in the short and medium term, but "that doesn't secure them for the longer term" he told MPs on the BERR select committee. | |
| "We can't afford to pay double our pension contributions or pass them on to the customers as that will drive volumes down," he added. | |
| However Billy Hayes, general secretary of the Communication Workers Union (CWU), said that the trustees' letter was "a distraction designed to scare MPs". | |
| "Privatisation is not linked in any way to sorting out the pension fund. It's not even about protecting pension benefits, it's about making the company viable for take-over," he added. | "Privatisation is not linked in any way to sorting out the pension fund. It's not even about protecting pension benefits, it's about making the company viable for take-over," he added. |
| About 140 Labour MPs have signed a motion opposing the part-privatisation. | About 140 Labour MPs have signed a motion opposing the part-privatisation. |
| 'Devastating consequences' | 'Devastating consequences' |
| The Hooper review, published in December, recommended that the government take over the Royal Mail pension scheme, to remove the burden of the deficit from the business, as part of a partial privatisation process. | The Hooper review, published in December, recommended that the government take over the Royal Mail pension scheme, to remove the burden of the deficit from the business, as part of a partial privatisation process. |
| Business Secretary Lord Mandelson speaking in January this year | Business Secretary Lord Mandelson speaking in January this year |
| Ms Newell's letter echoes this, and warns that in its present state the company is financially very weak, and is technically insolvent with its debts outweighing its assets. | Ms Newell's letter echoes this, and warns that in its present state the company is financially very weak, and is technically insolvent with its debts outweighing its assets. |
| If the recommendations of the Hooper review are not pushed through, she argues, then the trustees would be forced to change the way they value the scheme. | If the recommendations of the Hooper review are not pushed through, she argues, then the trustees would be forced to change the way they value the scheme. |
| That would increase even further the cost of paying pensions in the future for the scheme's 450,000 members, with the knock-on effect of making the deficit even larger. | That would increase even further the cost of paying pensions in the future for the scheme's 450,000 members, with the knock-on effect of making the deficit even larger. |
| As the Royal Mail could not afford to pay higher contributions, then this might trigger the collapse of the company and the closure of the scheme. | As the Royal Mail could not afford to pay higher contributions, then this might trigger the collapse of the company and the closure of the scheme. |
| A larger deficit is "highly unlikely to be affordable by Royal Mail, with potentially devastating consequences", Ms Newell says. | A larger deficit is "highly unlikely to be affordable by Royal Mail, with potentially devastating consequences", Ms Newell says. |
| "At present, in a winding-up the plan would not even be able to provide as much as 50% of members' benefits," she adds. | "At present, in a winding-up the plan would not even be able to provide as much as 50% of members' benefits," she adds. |
| The company is already committed to paying an extra £284m a year, for the next 15 years, to pay off a £3.4bn deficit that was calculated in 2006. | The company is already committed to paying an extra £284m a year, for the next 15 years, to pay off a £3.4bn deficit that was calculated in 2006. |
| Another valuation of the scheme has to be agreed by 30 June next year. | Another valuation of the scheme has to be agreed by 30 June next year. |
| Protest | Protest |
| In December, Business Secretary Lord Mandelson, to whom Ms Newell's letter is addressed, endorsed the recommendations of the Hooper review that called for a minority stake in the business to be sold off. | In December, Business Secretary Lord Mandelson, to whom Ms Newell's letter is addressed, endorsed the recommendations of the Hooper review that called for a minority stake in the business to be sold off. |
| HAVE YOUR SAY It is wrong to privatise Royal Mail. Part-privatisation will be the thin end of the wedge David King, Herefordshire Send us your comments | HAVE YOUR SAY It is wrong to privatise Royal Mail. Part-privatisation will be the thin end of the wedge David King, Herefordshire Send us your comments |
| He said Royal Mail could not survive in its current form, because of severe financial constraints and falling demand for sending letters, and needed fresh investment in technology to prosper. | He said Royal Mail could not survive in its current form, because of severe financial constraints and falling demand for sending letters, and needed fresh investment in technology to prosper. |
| Lord Mandelson denies the plan amounts to a sell-off of the business, saying it will be a "partnership" that maintains Labour's commitment at the last election to keep Royal Mail in public ownership. | Lord Mandelson denies the plan amounts to a sell-off of the business, saying it will be a "partnership" that maintains Labour's commitment at the last election to keep Royal Mail in public ownership. |
| But unions will stage a mass protest on Tuesday against the plans, which they say are "deeply unpopular". | But unions will stage a mass protest on Tuesday against the plans, which they say are "deeply unpopular". |