Royal Mail’s workers have voted to take strike action over a change to their pensions and with Christmas, just around the corner, many people could have their parcels delayed by the strike. 

Royal mail

As the Communication Workers Union (CWU) Royal Mail workers vote by 89.1% to take strike action in a dispute over changes to their pension scheme, this could prove disastrous for those who only send parcels at Christmas time says ParcelHero.

Royal Mail has one of the best pension arrangements in the delivery industry. Over 60% of Royal Mail employees in the UK are in a Defined Benefit pension scheme. The figure for the UK private sector as a whole is under 5%. However, the current Defined Benefit scheme is just not affordable, according to Douglas Hamilton, head of pensions strategy at Royal Mail. If no changes were made, annual contributions would increase next year from around £400 million to around £1.2 billion. That increase is at least three times more than Royal Mail’s annual free cash flow. And as e-commerce overtakes in-store Christmas shopping for the first time, it is clear that this may be one of the sources of Royal Mails issues.

“We have never hidden the fact from our Defined Benefit scheme members that the benefits they build up from April 2018 will be smaller than they are now. That’s because the Company cannot afford the Plan in its current form.” States Douglas Hamilton, head of pensions strategy at Royal Mail, “But with our current Defined Benefit cash balance proposal we have moved a long way compared to the Defined Contribution proposal we originally put forward. Furthermore, this is not about cost-cutting. Royal Mail will continue to pay broadly the same in pension contributions after its proposed changes as it does now.”

“The CWU came forward with a Wage in Retirement scheme, but, unfortunately, this scheme would not be sustainable, secure or affordable for the Company or our employees. The CWU’s scheme is an attempt to set up a defined ambition type scheme within the current defined benefit regulatory framework. Unfortunately, that just doesn’t work. Further, if our current Defined Benefit scheme had adopted the CWU’s proposed investment strategy in 2012 the Company would already have had to close the scheme to future accrual, rather than being able to meet its commitment of keeping it open until March 2018”

“In short, we’ve put forward a proposal which provides a good and fair outcome for members of our Defined Benefit pension scheme. We’re also proposing increasing Royal Mail’s contribution to the Royal Mail Defined Contribution Plan, which benchmarks very well compared to other large employers in the UK.”

So, what could this mean for those loyal Royal Mail customers? Even the most loyal of habitual Royal Mail customers, who joins the long Post Office queues and pays considerably over the odds for the privilege, will turn to a courier service for the first time. And once consumers see the ease by which their packages can be picked up and sent to any destination in the UK and overseas that the Royal Mail sends to, they may turn their back on the Post Office.

“For some families, the timing of any strike or work to rule could mean that Christmas is cancelled by this action,” says David Jinks MILT, ParcelHero’s head of consumer research. “If industrial action goes into the seasonal period it will have a huge impact. Even if the strikes are limited; it will have significant consequences across the industry as other delivery companies try to absorb the extra volumes at this hugely busy period.”

“Additionally, the worry is that last year Royal Mail delivered 130million parcels at Christmas. That’s a huge volume facing courier services in the UK if the Royal Mail takes any kind of industrial action over the Christmas period. Last year e-commerce overtook in-store sales at Christmas for the first time; online Christmas spending was a whopping £133bn. All these shipments need to be delivered as well as presents being sent by friends and families. Any Royal Mail strike action – however, limited -will lead to significant stretching of the entire industry over Christmas.” continues David.

“Of course, everyone sympathises with Royal Mail workers whose generous pension scheme terms are being changed around them. Posties work early shifts and some of the job is quite physical; they’ve earned their pensions. But any action leading into the busiest Christmas period will have a huge impact on the ordinary public and could also be the beginning of the end for the Royal Mail.”

Says David: ‘By using a price comparison site like ParcelHero people will realise how much more cheapy and conveniently parcels can be sent these days. On average using a broker such as ParcelHero parcel mailings are 60% cheaper than using the Post Office. Can the Royal Mail bounce back from that?’