Reuters – Britain’s Royal Mail (RMG.L) on Friday offered employees a higher pension contribution under an alternate plan as it prepares to close its final salary pension scheme next March.
The postal and parcel deliver company said employees would be offered a choice between a modified defined benefit or contribution pension scheme.
The move secured the backing of trade unions which had threatened to strike.
Royal Mail offered to raise its contribution to retirement accounts to 13.6 percent from the 12.6 percent offered in April. The company declined to specify how much lower the percentage contribution is compared to the scheme set to close.
It said the plan would cost about 400 million pounds ($519 mln) annually, down from the more than 1 billion pounds it said it would cost to keep the original final salary pension scheme running.
“Royal Mail believes that the risk to the company of the proposed defined benefit cash balance scheme would be materially lower than under the current plan and is a manageable risk,” it said.
Royal Mail said it held extensive talks with its unions, Unite/CMA and the Communications Workers Union (CWU).
Unite said in an emailed statement that it would hold a ballot seeking the views of its 6,000 Royal Mail managers, starting next week and closing on Aug. 7.
The union said it would not be making a recommendation to its members on the package.
“We think it is important that Unite members have an opportunity to express an opinion on what is being put forward by the company,” Unite officer for Royal Mail, Brian Scott, said.
“We have had many discussions with the company over the last few months and these have been difficult… the Unite negotiating team consider that what is on offer is the best achievable in the circumstances.”
The CWU has opposed Royal Mail’s move to close the scheme and said it would result in employees in the plan losing on average up to a third of their future pensions.
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 is 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.
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.
Royal Mail’s shares were down 2.8 percent at 400.7 pence at 1022 GMT. The FTSE blue chip index .FTSE was 0.2 percent lower.