Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

Royal Mail pension assets sell-off could generate £25bn

Tories urge chancellor to spend windfall from investments to pay postal workers’ retirement benefits on infrastructure projects

The government could raise as much as £25bn by selling off assets built up to pay retirement benefits to postal workers from Royal Mail, to which it expects to gain access over the next couple of weeks.

The money has been invested in shares, bonds and property by the Royal Mail Pension Plan but George Osborne is being encouraged by backbenchers to spend it on new priorities such as an infrastructure fund to build new rail and energy networks.

The portfolio of assets will come available under a scheme to make Royal Mail easier to sell off by transferring its pension liabilities – and its credits – to the government once permission under competition rules is granted by Brussels.

“State aid approval is the next critical step in our plans to put Royal Mail on a secure footing. We have been working closely with the European Commission and expect a decision in the coming weeks,” said a spokeswoman for the Department of Business, Innovation and Skills.

The BIS would not comment on the level of assets transferring to the government at this stage, nor predict what use might be made of the money.

Treasury officials admitted that the £25bn – still to be valued properly – would reduce public sector debt on the government’s balance sheet, but they said it could not be considered a windfall because of ongoing liabilities to retired postal workers.

The publicly owned Royal Mail is currently required to set aside specific financial provisions to pay for its existing 300,000 pensioners and future retirees on a continuing basis, just like a private sector company. The government does not have to do this, and so the £25bn portfolio is counted as a “surplus” while liabilities are treated similarly to the unfunded pension schemes of the NHS or armed forces.

The Royal Mail had been seen as unsellable by the state because of the £4.5bn pension deficit built up after management decided to take a “holiday” and cease paying into the schemes.

The Communications Workers Union said it was pleased that ministers were taking responsibility for the retirement funds and releasing it from the uncertainty of the current system. But it remains strongly opposed to privatisation, which, a spokeswoman said, is “not in the interests of the company, the workers or the customers”.

The Royal Mail declined to comment on the pension fund developments but the chancellor will clearly be delighted at the possibility of a windfall, which might be factored into to his thinking for the 21 March budget.

Some backbenchers want any cash to prime the pump on the new road, rail and energy infrastructure that Britain needs at a time when it is trying to introduce a lower-carbon economy. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds