Households pay a tab for £50billion in postal workers’ pensions: Liabilities were stealthily dumped on the state when Royal Mail was privatized a decade ago
Heavy: Royal Mail pension liabilities
Taxpayers are responsible for more than £50billion in postal workers’ pensions, The Mail on Sunday can reveal.
Liabilities were slyly dumped on the state when Royal Mail was privatized a decade ago under the government of David Cameron, who was accused last night of ‘deplorable sleight of hand’.
Royal Mail, since renamed International Distribution Services, went public in 2013 but its share price has fallen amid strikes costing it more than £1million a day.
The potential bill to meet future pensions has skyrocketed since privatisation, from £38bn to £51bn. Former Chancellor George Osborne used the assets of the Royal Mail pension fund to reduce short-term public debt.
It brought in £17 billion. But much of Royal Mail’s assets – government IOUs known as gilts – have been returned to the Treasury for free, resulting in a loss of £11billion to taxpayers.
“The government’s takeover of the Royal Mail pension fund to enable privatization was a deplorable sleight of hand,” said Neil Record, president of the Institute of Economic Affairs. The removal of pension costs inherited from Royal Mail’s balance sheet has made the shares more attractive to investors. But it also made the company more vulnerable to predators, as a large pension fund deficit would have acted like a “poison pill”.
Czech tycoon Daniel Kretinsky has acquired a 23% stake in Royal Mail. He is rumored to be plotting a breakup that would involve separating the profitable European parcels division from loss-making parcels and letters.
The pension liabilities of the largest public sector schemes exceed £2 trillion, almost as much as the total annual output of the UK economy. “All of this will have to be paid for by future taxpayers,” Record said.
The government spokesman said: ‘The decision to take responsibility for the Royal Mail pension scheme has successfully ensured the security of the fund for employees and facilitated private sector investment.’
