(Adds Unite statement)
April 28 Britain's Royal Mail is looking
at ways to replace the final salary pension scheme it plans to
scrap at the end of March 2018, after a backlash from unions
including the threat of possible strike action.
Royal Mail, the postal service privatised in 2013, said on
Friday it was one of only a few major companies to still have
staff in a defined benefit scheme, a type of pension that pays
out according to workers' final salary and length of service.
The Communications Workers Union (CWU) opposes Royal Mail's
move to close the scheme and says it would result in employees
in the plan losing on average up to a third of their future
Around 90,000 Royal Mail workers are in the scheme, whose
closure to new members in 2008 resulted in about 40,000 workers
joining a less generous defined contribution plan.
Royal Mail said among the options for those leaving the
older scheme, it was considering a defined benefit cash balance
scheme, where employees would receive a fixed sum at retirement
plus payments based on the performance of a pension fund. Royal
Mail said this built on a proposal put forward by the CWU.
"We believe that the defined benefit cash balance scheme
would be a fair proposal that compares favourably with the
retirement benefits offered in our industry and by other large
UK employers," the company said in a statement.
British companies are facing increasing costs to fund
pensions as people live longer and investment returns on bonds
have fallen and are expected to remain low.
At 1310 GMT, Royal Mail shares were down 3.7 percent at
The new scheme would be set up in a new section of the
company's overall pension plan, with employees also having the
option to join the defined contribution scheme, it said.
Royal Mail said the cost of the new plan would be much lower
than that required to maintain the current arrangement, which
would have meant it more than doubling its annual contributions
to over 1 billion pounds ($1.3 billion).
The company currently pays around 400 million pounds a year
into the defined benefit scheme, and a spokesman said the cost
of the new proposed scheme would be similar.
The company is continuing to hold talks with the CWU as well
as unions Unite/CMA over its pension plan, it added.
Unite said talks with Royal Mail over plans to close the
defined benefit scheme were "complex and difficult."
"...if we don't achieve a satisfactory outcome, we can't
rule out an industrial action ballot," Brian Scott, the union's
officer for the Royal Mail said in an emailed statement.
(Reporting by Esha Vaish and Rahul B in Bengaluru; Editing by
Hugh Lawson and Mark Potter)