I worry for Royal Mail, I really do.
Royal Mail told the BBC its quality of service had been hit by the long-running industrial dispute, which led to 18 days of strike action.
Under Ofcom’s rules, Royal Mail has to deliver 93% of first class mail within one working day and 98.5% of second class mail within three working days.
But Ofcom said that in 2022-23, Royal Mail only delivered 73.7% of first class mail on time and 90.7% of second class mail on time.
Even allowing for the impact of strike action, extreme weather and the runway closure at Stansted airport, Ofcom said Royal Mail’s first and second class performance was only 82% and 95.5% respectively.
The fine is small beer in the overall scheme of things. What is more worrying is the deteriorating service achieved despite the rising cost of stamps (a first class stamp now costs £1.25).
Back in March, when Ofcom kicked off its investigation into delivery times, Royal Mail announced a £1bn loss for the previous trading year , telling analysts it didn’t expect to return to profit till 2025.
My worry for Royal Mail’s pensions.
It is more than 5 years since Royal Mail and its principal union , CWU, shook hands on a deal which was to share the risk of providing pensions to Royal Mail’s (then) 140,000 staff via a CDC arrangement. Since then we have had the legislation for the scheme but not the scheme itself and in the meantime , the industrial action the scheme was designed to acert has returned.
Royal Mail’s covenant stands behind the covenant to the CDC scheme – which is a defined contribution, It also stands behind the covenant of a cash balance scheme designed to provide the tax free cash for the postal workers – as a defined benefit.
The Royal Mail needs all the help it can get and let’s hope that means that the delays to the CDC scheme (rumoured to revolve around tax) need to stop and the scheme open.
The majority of Royal Mail’s historical DB liabilities were bought out by HM Treasury and are now sitting on the nation’s balance sheet.
But there are still a lot of pensions to be paid and a lot of postal workers building up benefits in the Royal Mail DC plan, which is not the long-term idea.
Royal Mail is not just CDC’s poster child, it is still one of the largest employers in the land and one on whom most people still rely.
I wish Royal Mail well and will keep a watching eye on the situation. Whatever can be done to make their brave plans work – should be done.
Royal Mail cannot miss more of its pension delivery targets