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Mail discovers £4bn pension fund hole
£4bn pension hole has been uncovered at Royal Mail which will alarm staff
and government while forcing the cash-strapped management to consider
pumping huge amounts into its retirement scheme.
The problem will be revealed as early as next week on publication of its
annual accounts and takes the gloss off a significant improvement in the
state-owned company's overall financial position.
The post office group is likely to report an operating loss of about £230m
for 2002-03 - the first 12 months of a three-year recovery plan - compared
with a £350m deficit in 2001-02.
The black hole, one of the biggest ever revealed in a British business,
has to be declared because of recent FRS17 accounting rules.
The group declined to talk yesterday about its pension and financial
position, saying it would discuss these issues with its 200,000 staff
before making any details public.
But industry sources insisted that Royal Mail, which is chaired by
former Asda boss Allan Leighton, was not likely to be surprised by the
scale of its pension liabilities.
"The details you get from FRS17 are just a snapshot and they were
obtained at the end of March when the company's financial year ended and
when the stock market was at a particularly low ebb," one source
"The Royal Mail is currently in the middle of a proper actuarial
review of its pension lia bilities which it undertakes every three years.
The results of that review should be known in the autumn and give a much
better view of the real liabilities faced."
But if the scale of the deficit is confirmed it could force Royal Mail
to start pumping in up to £2bn over the next decade into the £15bn
Meanwhile, Mr Leighton will argue that his restructuring plan is
beginning to pay off.
Much of the improvement can be attributed to a considerable reduction in
costs, not least the impact of 15,000 staff leaving over the past 12
Royal Mail has also benefited from rejigging its Parcelforce business,
closing almost half of the previous total of 100 depots.
The overall daily losses might have dropped below the £1m a day but the speed of the turnaround is being delayed by negotiations with the unions over the introduction of a single mail delivery.