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Members of the Royal Mail Collective Pension Plan (RMCPP) who choose to save for an additional lump sum payment will receive an extra 1 per cent in employer contributions, its half-year report has revealed.
The RMCPP will comprise a collective defined contribution (CDC) section and a defined benefit lump sum (DBLS) section.
The new arrangements will have fixed employer contributions of 13.6 per cent and employee contributions of 6 per cent, as previously confirmed, while workers that choose to save for an additional lump sum will receive an additional 1 per cent in employer contributions.
Based on current expectation, the CDC section of the scheme will be accounted for as a DC scheme and the DBLS section as a DB scheme with the accounting treatment expected to be similar to the transitional DB Cash Balance Scheme (DBCBS).
In its half-year report, Royal Mail also outlined the funding levels and contributions to its existing pension schemes.
The DBCBS saw its IAS 19 deficit increase in the six months to 26 September 2021 from £394m to £504m, with assets rising from £1,192m to £1,412m and liabilities increasing from £1,586m to £1,916m over the period.
Royal Mail noted that the scheme was not in funding deficit, and it did not anticipate that deficit recovery contributions would be required.
The Royal Mail Pension Plan (RMPP), which closed to future accrual in March 2018, had a pre-withholding tax accounting surplus of £3,720m, up from £3,666m at the end of March 2021.
Asset values rose from £11,441m to £12,201m over the six months, while liabilities increased from £7,775m to £8,481m.
The RMPP actuarial surplus at 30 September 2021 was estimated at around £119m, up from £163m at the end of March 2021.
The report stated that Royal Mail expects to contribute around £270m in 2021/22 to the DBCBS and RMPP, with employees predicted to contribute £100m.
It also expects to contribute approximately £120m to the Royal Mail DC schemes.
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