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The Future Challenge on Pensions

The Future Challenge on Pensions. UK Pension Funds. PENSION FUND DEFICITS FRS 17. UK Occupational Pension Scheme Funding Crisis. Top 5 (FRS 17) reported deficits 2005 BT £5.14bn BAE £4.33bn Lloyds TSB £3.19bn RBS £2.85bn Uniliver £2.8bn FT350 Companies (FRS 17) deficit £93 bn.

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The Future Challenge on Pensions

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  1. The Future Challenge on Pensions

  2. UK Pension Funds • PENSION FUND DEFICITS • FRS 17

  3. UK Occupational Pension Scheme Funding Crisis • Top 5 (FRS 17) reported deficits 2005 • BT £5.14bn • BAE £4.33bn • Lloyds TSB £3.19bn • RBS £2.85bn • Uniliver £2.8bn • FT350 Companies (FRS 17) deficit £93 bn l

  4. Future Threat Recent NAPF survey found 80% of Companies who still offer Final Salary Schemes are planning to close them to new members within the next five years l

  5. Retirement Age – Public Sector “Turner” Commission calls for increase in retirement age beyond 65 Age 67 being recommended Change in Legislation October 2006 l

  6. Public Sector • Public Sector Pensions under attack • Government propose to withdraw final salary scheme – introduce retirement age of 65 • Agreement to maintain age 60 retirement for existing civil servants • Move to an average earnings scheme arrangement • Introduce flexibility when pension can be taken Royal Mail is in this mix !! l

  7. Royal Mail FundSome Facts • Royal Mail Accounts deficit £4.26bn FRS17 • Scheme (Actuary) deficit £2.56bn (2003) l

  8. Value of assets at today’s date £20bn • Value of liabilities at today’s date £21.5bn l

  9. Royal Mail Fund Royal Mail’s contribution last five years • 2000 = £135m • 2001 = £201.9m • 2002 = £222.9m • 2003 = £248.4m • 2004 = £647.9m • 2005 = £670m Total£2.12bn l

  10. Contribution and Mortality • Contributions Employer – 12.6% Employee – 6% • Mortality Royal Mail Pension Plan 1991/94 Age 79 2003/05 Age 82.5 • 2006 Valuation Mortality rate will have effect on scheme funding l

  11. Postcomm - Pension • On-going pension contribution.13.8% of pensionable pay • Funding of deficit £274m (03/04) up rated in line with RPI £296m (06/07) Deficit paid over 17 years • Total deficit to whole of Royal Mail group £370m (06/07) • Postcomm allowed £700m to deal with mortality increase l

  12. CWU Policy • Maintain Final Salary Scheme • Remove lower earning deduction £3328 • Maintain retirement age 60 l

  13. Summary • Maintain Final Salary Scheme • Retirement Age • Lower Earning Deduction • RM Scheme in Deficit l

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