UK - The trustees of the £20bn ($30.8bn) Royal Mail Pension Plan have tabled a 38-year deficit reduction plan to The Pensions Regulator, the Hooper report reveals.
The length of the repayment period - described by Hooper as "quite unprecedented by modern standards" - led the regulator to indicate it had "substantial concerns" over the postal services firm's deficit recovery plans (PP Online, 30 July).
Hooper said 38 years represented "the shortest period of time over which Royal Mail can realistically afford to pay [the deficit]", a statement which could leave TPR in an awkward position.
He added: "Such a long repayment period is quite unprecedented by modern standards and The Pensions Regulator has expressed substantial concerns about this and the deficit figure. The agreement is now subject to a formal review by TPR.
"TPR has wide-ranging powers that could extend to imposing a new and more difficult recovery plan, with unknown consequences for the affordability of the deficit repayments. The review by the TPR compounds the problems already associated with the pension deficit."
The report also revealed the deficit was hurting Royal Mail in three key areas: profit and loss, the balance sheet and cash flow. It said the company is "balance sheet insolvent", with the shortfall exceeding total assets by £2.1bn.
This follows Hooper's recommendation this morning that the government should take responsibility for the scheme's £8.0bn deficit (PP Online, 10 September).
A spokesman for TPR reiterated the organisation's concern over Royal Mail's funding proposals, although he was unable to comment on the specifics of the case.
This week's edition of Professional Pensions is out now.
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