Royal Mail share price heads south as group unveils pension proposals

on Apr 28, 2017
Updated: Oct 21, 2019

Shares in Royal Mail Group (LON:RMG) have fallen into the red in today’s session as the privatised postal operator new unveiled proposals for its pension plan. The move came after the company recently scrapped its defined benefit scheme, which guarantees a retirement income to members, having signalled that it is unaffordable beyond next year.

As of 13:25 BST, Royal Mail’s share price had lost 3.46 percent to 404.40p, underperforming the broader market, with the benchmark FTSE 100 index currently 0.47 percent worse off at 7,203.41 points. The group’s shares have lost more than 17 percent over the past year, and are down by more than 12 percent in the year-to-date.
Royal Mail announced in a statement today that it was looking at options for the accrual of retirement benefits after March 31 next year, including a Defined Benefit cash balance scheme which builds on a proposal put forward by the Communication Workers Union (CWU).

The company explained that from April 1, 2018, the Defined Benefit cash balance scheme would provide members with a guaranteed lump sum at retirement. In addition, discretionary increases would be applied up to retirement, subject to the investment performance of the scheme. Once applied, these increases would also be guaranteed.
“We believe that the Defined Benefit cash balance scheme would be a fair proposal,” Royal Mail said in the statement, adding that it would continue to discuss the future of the plan with unions. At the time of writing, the CWU had not commented on the FTSE 100 group’s latest proposal.
The 15 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 479.00p on the stock, with a high estimate of 590.00p and a low estimate of 360.00p. As of April 21, the consensus forecast amongst 17 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.
As of 13:42 BST, Friday, 28 April, Royal Mail share price is 404.20p.

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