Royal Mail workers to vote on plans to reform pension scheme

Updated: 

Workers at Royal Mail are to vote on proposals by the postal firm to reform its pension scheme as it attempts to avert the threat of strike action.

The privatised group had planned to close its defined benefit pension scheme next year, which resulted in fury from the Unite and the Communication Workers Union (CWU).

However, on Friday, Royal Mail said that after "extensive talks" with unions, Unite is planning to hold a consultative ballot of its members on a new proposal, as it believes this is the "best available deal" and a "significant improvement" on an earlier proposal.

"Royal Mail is one of few companies offering to replace one defined benefit scheme with another," the company said.

The offer - which will see Royal Mail present a choice between joining either a defined benefit cash balance scheme or a defined contribution scheme to the plan's 90,000 members - has also been extended to CWU members.

The company pays £400 million a year into the pension fund but warned this could rise to more than £1 billion in 2018 under the current terms, which guarantees a pension based on average salary.

The mail carrier said on Friday that its new proposal can be funded within its current £400 million contribution and, as a result, the risk to the group would be materially lower than at present.

Under the new proposals, the defined benefit cash balance scheme would provide members with a guaranteed lump sum at retirement, with Royal Mail upping its contribution.

Plan members would also have the option of joining a new defined contribution scheme as an alternative.