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The government has spent the Royal Mail pension pot – costing taxpayers £4m a day. Taxpayers have been slapped with a £45billion bill for Royal Mail’s pension pots after mismanagement left the scheme with no cash to pay retirees.
The Conservative Party and Liberal Democrats coalition government took over most of the company’s pensions in 2012 ahead of privatisation, but then spent the scheme’s assets and left taxpayers on the hook for decades of payments, an expert warned.
Neil Record, a former Bank of England economist, said: “The Government promised index-linked pensions to a large group of employees, then took the £29bn that sat in the pension fund and spent it. Out of the blue, a new unfunded liability of approximately £50bn emerged solely to allow the Government to sell off the Royal Mail.
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“That £50bn is saddling future taxpayers with the obligation to repay this debt.” The gold-plated scheme has already cost taxpayers £16.5billion since 2012, an average of around £3.8million a day, according to official data. Another £28.7billion needs to be paid before the scheme ends.
In 2016, the Royal Mail scrapped its gold-plated pension scheme, saying it is too expensive to run. Royal Mail would not comment on what kind of pension it would offer the final salary scheme’s 90,000 members after 2018 but said it was braced for crunch discussions with unions.
The company was the latest final pension scheme to close after being hit by low interest rates and rising life expectancy which have caused payout promises to workers to balloon.
At the time, the Royal Mail said it cannot guarantee the scheme’s survival beyond 2018 after it emerged its annual operating costs had ballooned from £400million to over £900million, which it said was ‘not sustainable’.
According to actuarial firm Hymans Robertson, black holes in these schemes have ballooned to £945billion, from £885billion.
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