Royal Mail to announce record scheme deficit

28 July, 2010

The Royal mail is expected to announce a £10.3bn pension scheme deficit next week, when the results of its triennial valuation are published.

The revelation, first published on Sky News, means the scheme’s deficit has tripled since its last valuation in 2007.

The size of the deficit has sparked further speculation about the potential future ownership of the company. The government’s stated aim since the election is to part-privatise Royal Mail, with a potential stock market floatation netting the company an estimated £4bn.

However, Paul Jayson, a partner at consultancy Barnett Waddingham said the size of the deficit made it likely the government would stand behind the scheme.

“If the business is likely to be sold, what purchaser would want to take on the pension scheme obligation?” he asked.

Given the size of the alleged deficit, passing the scheme into the Pension Protection Fund would cause the lifeboat insurer severe difficulties.

“It seems that the only practical route is for responsibility for the deficit to fall on future taxpayers, as with many other debts that have emerged recently as a result of the financial crisis,” Jayson said.