The cheque’s in the post

The Chancellor is due to receive a “windfall” of £25bn if plans for the Government to take over the Royal Mail pension fund go ahead.

In a sleight of hand that would make David Blaine blush, this will enable the Government to take credit for £25bn of assets but, for accounting purposes, ignore the associated £35bn of liabilities (in respect of pension benefits covering over 400,000 current and retired employees).

Nice one George.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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6 Responses to The cheque’s in the post

  1. I am surprised that the Pensions world has so far been so sanguine about the extraordinary and unprecedented proposal by Government to sequester the Assets of the Royal Mail Pension Fund. The action is almost Maxwellian in its audacity and whilst presented as being in the interests of the members of the Fund it is in fact a cynical move designed to boost the Treasury coffers and prepare the Royal Mail for privatisation. Whilst the Fund has a negative Funding ratio it nevertheless has £28bn of Assets that employees, the sponsor and trustees have built up over the years. It is the members’ money and only they have a right to it. By transferring members from a funded trust into the much less assured world of being an unfunded liability on the public finances is far from necessarily in their interests. As we have seen Governments can and do change the basis of Public Sector pensions at their discretion and there is little that anyone can do to stop them. A Pensions Trust provides legal protection to its members and has Trustees to exercise that protective role. At a stoke Royal Main fund members will lose that security and no longer have Trustees acting in their interests.

    • Markl Rugman says:

      The Royal Mail Statutory Pension Scheme, which will take on the liabilities for deferred and pensioner members (and for employee-members, their past service liabilities), will contain the same protections which previously existed for them under the Royal Mail Pension Plan. Schedule 2 of The Transfer Order (SI 2012/687) effectively imports the ‘section 67’ protections from the Pensions Act 1995. It is hard to see how the improved security and equivalent protections can be anything other than an improvement on the current situation.

  2. henry tapper says:


    I agree with you amd I’m surprised that this move has been welcomed by the unions.

    It may be that they consider that members have more chance of getting a 100% pay out from an unfunded public sector scheme than from a partially funded scheme with a weak employer convenent.

    But I suspect that as time goes by, the security that active and defferred members currently enjoy will be diluted and once the “windfall” has been absorbed into the national defecit, the liabilities, that don’t appear on any balance sheet, will be considered as “another Government’s issue”.

    I think the immediate consideration will be future accrual but the RPI/CPI switch suggests that existing benefits are not as safe as might be imagined.

  3. Mentioned my concern to Joanne Segers of NAPF at Edinburgh conference recently. She shrugged her shoulders.

  4. Mike Atkin says:

    Good points chaps. I suppose Greek pensioners thought their pensions were assured.
    Another perspective…
    Why not take all pension schemes in to one mighty UK fund.
    We can call it UK Growth and Infrastructure. We can then make strategic investments in UK assets (such as power, roads, hospitals) that will provide a healthy revenue stream for the security of pensioners in the years ahead. Or we can carry on flogging off the nations assets (if there are any left) to the cheapest foreign bidders who can then fleece the consumers in order to pay the pensioners in his own country and blackmails the uk government before making any investment to upgrade the asset. Power is an example, PFI hospitals another. Is it really such a daft idea to invest in UK Plc – or we can just leave the current “unfit for purpose “ad hoc arrangements in place and continue blinkered hoping for the best – did someone mention pensions timebomb.
    I know which our financial services industry will vote for.

  5. henry tapper says:

    Can we find a balance between a universal funded pension along the lines you’re suggesting Mike and Steve Webb’s vision of “a Regulatory System that allows a thousand flowers to bloom” ?

    The financial services industry, self-serving though it is, is where the money is generated to pay for the state benefits on which we rely.

    The idealist in me is with you but then I remember that I am myself dependent on the fees I generate. (Am I an hypocrite or a pragmatist?)

    I end up concluding that these contradictions are necessary – I can’t imagine anything worse than a world dictated by the DWP- except perhaps one dictated by Goldman Sachs!

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