The Government has “manipulated the system” in allowing the Royal Mail to push its £8bn pension deficit onto the taxpayer, a pensions lawyer has warned.
Last week, Business Secretary Vince Cable revealed the Government-run postal services organisation could be mutualised as it attempts to slash operating costs.
As part of the changes, which will be brought forward in the second part of the Postal Serv-ices Bill following Richard Hooper’s review of the company earlier this year, the pension scheme will be nationalised to allow other parts of the business to be sold off.
Nabarro partner Anne-Marie Winton says: “It is solving with legislation what the private sector would love to do. They are effectively just parking the pensions deficit. Effectively, the Government is manipulating the system. Absent this bit of legislation, I don’t see how the privatisation would actually work.
“It certainly shows that it is not a level playing field because we cannot do that in the private sector but you can in the public, which seems a bit tough for the taxpayer.”
The bill, if passed, will effectively enable the Government to set up a mirror of the current scheme. The taxpayer will then be responsible for paying off the deficit once an agreement has been reached with The Pensions Regulator over the length of its recovery plan.
TPR is currently mulling over the deficit repayment structure presented to it by Royal Mail. The plan includes a 38-year recovery period, described by Hooper as “unprecedented by modern standards”. TPR previously indicated it had “substantial concerns” over the recovery plan.
The decision could also fall foul of the EU competition rules. She says: “You could argue that the state is doing something to make a particular business more marketable. What if there were other competitors to Royal Mail, like UBS, who might say, ’we would love to have the luxury of dumping our pension liabilities and starting again but we cannot’”.