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Post Office Pensions

Royal Mail pension fund transfer due in April

Royal Mail pension fund assets and liabilities are set to be transferred to the government next month, subject to EU approval, the BBC understands.

The move means that Royal Mail pensioners will enjoy a state guarantee of their retirement benefits.

It also paves the way for the eventual privatisation of the Royal Mail.

The transfer - which was backed by the Communication Worker's Union - will provide a windfall gain to the government's budget of about £28 bn.

That is because of the accounting treatment of the pension fund.

The £28 bn of assets will result in an immediate one-for-one reduction in the budget deficit.

The pension fund's £37.5bn liabilities, in contrast, will only show up in the deficit over the next 20 to 30 years.

The pension liabilities are treated similarly to the unfunded pension schemes of the National Health Service or armed forces, and are not considered an immediate debt of the government for accounting purposes.

The resulting £28 bn windfall is the equivalent of almost 2% of the UK's gross domestic product - the value of everything produced by the British economy in one year.

A Treasury spokesman told the us that the money will be used to cut the deficit, and not be used for any giveaways.

The pension transfer removes one of the biggest obstacles to the government's planned privatisation of Royal Mail.

BBC business correspondent Joe Lynam said: "The government is not commenting on what this move means for the privatisation plans of the Royal Mail.

"But it's safe to say that this is a giant leap towards the sale of Royal Mail as it removes the one major barrier: massive pension liabilities."

It is still subject to approval by the European Commission, which needs to confirm that it does not breach state aid rules - something that is expected to come next week.

The Communication Workers Union (CWU), representing postal workers, said it saw the government taking on Royal Mail's pension liabilities as a great success.

"We've been campaigning for this for years," a spokesman told the us. "When we first suggested it, we were laughed at. It's important that pensions are protected."

However, the CWU remains opposed to privatisation.

"It's not in interests of the public, customers or postal workers," the spokesman said.

We say “Why nationalise the debt and privatise the profits?"

Home March 2012