Royal Mail Group has reduced the liabilities of its defined benefit (DB) pension scheme from a deficit of £2.7 billion in March 2012 to a surplus of £825 million at March 2013.
The group’s Annual report and special purpose financial statements for the year ended 31 March 2013 showed that this reduction in pension liabilities followed the transfer of the majority of its Royal Mail Pension Plan (RMPP) liabilities and assets to the government at 1 April 2012.
At this date, the defined benefit (DB) pension scheme was also sectionalised, with Royal Mail Group and Post Office each becoming responsible for their own sections from 1 April 2012 onwards.
The report also disclosed that the Royal Mail Senior Executives Plan was closed to future accrual from 31 December 2012.
The group had reached an agreement with the trustees of the scheme to maintain its cash contribution requirement at £10 million a year until the March 2018 triennial valuation is completed.
The group has also agreed to a one-off deficit correction payment of £19 million to the plan during the year and placed £20 million into an escrow account in March 2013.
According to the report, this account has been established to provide security to the Royal Mail Senior Executives Plans as part of a funding agreement with its trustees. It has been treated as an investment in the group’s balance sheet.
Donald Brydon, chairman of the Royal Mail Group, said: “The pension transfer in April 2012 gave our employees who are members of the Royal Mail Pension Plan considerably more security with respect to the pension benefits they had earned up until 31 March 2012.
“It also immediately removed the obligation to make cash payments of around £300 million every year to address the pension deficit.
“Of course, the cost of continuing to provide one of the largest defined benefit pension schemes in the UK is material and growing.”