Royal Mail pulls back on pensions to save IPO

September 23, 2013, Monday, September 23rd: On Friday, Royal Mail scrapped a proposal to cap pensionable pay rises at the rate of inflation, up to 5 percent maximum, caving in to pressure from staff in order to protect its £3 billion IPO from the threat of a strike.

The upcoming Royal Mail IPO, announced on September 12, has met the opposition of employees represented by the Communication Workers Union (CWU), who have threatened to start a strike over pay, conditions and pensions.
The Friday offer to Royal Mail’s staff will allow increases for a majority of CWU-represented grades to accrue towards the final salary scheme.

The union polled 115,000 members on Friday, as announced last week, with the results expected on October 16. If the workers vote ‘yes’ to the strike, the earliest actions could start on October 23, the likely date of Royal Mail’s IPO.
The company pays £400 million annually into the final salary scheme to keep benefits at current levels and has said that without the proposed change the sum could rise to £700 million. Under Friday’s proposal

Royal Mail is going to keep pumping £400 million and will absorb the cost of the proposal.
“Royal Mail is making an important improvement to our pension proposal. We are doing so following feedback from the recent consultation,” the company said.
According to union sources quoted by The Sunday Times, Royal Mail’s offer is being evaluated, after a proposed 8.6 percent increase over three years has already been rejected by the CWU. According to a Ipsos Mori poll, 72 percent of respondents answered the CWU should accept the pay offer and cancel the strike, while 78 percent of those polled found the 8.6 percent offer “very fair” or “fair”.

**Royal Mail Gaining Trust**
Independent US rating company Rapid Ratings has given Royal Mail a higher financial health rating than any of the world’s post or parcels companies, thus supporting the UK government’s hopes to float the mail service company successfully.
!m[UK postal service rated higher than its most successful peers](/uploads/story/5629/thumbs/pic1_inline.jpg)

The assessment was conducted according to six broad criteria: sales performance, working capital efficiency, cost structure efficiency, debt service management and overall profitability.
Royal Mail’s current grade stands at 86 out of 100, up from 36 two years ago and above Austria Post’s 85, Deutsche Post DHL’s 79 and FedEx’s 74.
“This is a company that has changed dramatically in the past two to three years,” said Rapid Ratings’ CEO James Gellert.
The result is an endorsement of Royal Mail’s improved performance since its current CEO Moya Greene joined the company in 2010. Royal Mail posted a 60 percent increase in pre-tax profit to £324 million for the past year after two years of losses.
Rapid Ratings noted, however, that the UK company still lagged behind Deutsche Post in terms of operating efficiency and needed to invest in technology as it seeks to move focus onto parcels amidst the increasing volume of online shopping.

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