Royal Mail pension chaos is costing the public £4m a day

In a stark revelation, the public is facing an overwhelming bill of £45 billion due to the financial mismanagement of the Royal Mail pension schemes. The situation has escalated to such an extent that the government’s handling of the pension funds has resulted in nearly £4 million being drained from the public purse every single day.

Royal Mail pensions: another Tory mess

The predicament began when the Conservative Party – aided and abetted by the Lib Dems – took control of Royal Mail’s pensions ahead of the company’s partial privatisation in 2012. According to Neil Record, a former economist with the Bank of England, this arrangement allowed the government to wield influence over a pension fund that once boasted assets upwards of £29 billion.

However, the government soon embarked on a course of action that has the public to shoulder an enormous financial burden. Record 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.

The outcome of this mismanagement has been the emergence of a new unfunded liability estimated at around £50 billion. “That £50bn is saddling future taxpayers with the obligation to repay this debt,” he added.

Since the controversial decision was made, the gold-plated pension scheme has already drained approximately £16.5 billion from public funds, culminating in an eye-popping average expenditure of £3.8 million a day from 2012 onwards. Experts indicate that a further £28.7 billion in payments is still required before the pension scheme can be concluded.

In 2016, the Royal Mail came to the decision to abolish its previously revered pension scheme, citing the financial unsustainability of continuing to support such generous pension promises.

Broader implications

This decision not only impacted current retirees but placed future retirees in jeopardy, as Royal Mail is now unable to confirm what type of pension will be available to the 90,000 members of the final salary scheme after 2018.

Discussions with unions like the Communication Workers Union (CWU) are ongoing as the company seeks to establish pathways forward amidst an unfolding pension crisis.

The ramifications of the Royal Mail pension scheme debacle extend beyond individual claimants.

The financial strain has broader implications across the nation. With pension pots nationwide grappling with threats of significant deficits, an actuarial firm, Hymans Robertson, has reported that the collective shortfall has surged to £945 billion, up from £885 billion.

Such figures underscore the seriousness of the situation and the potential long-term impact on public finances, employees, and retirees alike.

Royal Mail: FFS

In this climate, the government is blaming benefit claimants and disabled people for the mess the country’s finances are in – and cutting their entitlements accordingly.

Meanwhile, Individuals reliant on pensions are left to navigate a landscape where promises made by the government have highlighted the risks associated with relying on state-backed schemes. And in tandem with this, there is still the takeover of Royal Mail hanging over workers’ heads.

The Royal Mail pension situation serves as a glaring example of how disastrous decisions made at the highest levels of government can reverberate throughout society, impacting not only current employees but also future generations of the public.

Featured image via the Canary