The Government spent the Royal Mail pension pot – costing taxpayers £4m a day
Taxpayers have been handed a £45bn bill for Royal Mail's pensions after government mismanagement left the scheme with no money to pay retirees, The Telegraph can reveal.
The coalition government took over most of the company's pensions in 2012 ahead of privatisation, but then spent the scheme's assets and left taxpayers on the hook for decades of payments, an expert warned.
As a result, the gold-plated scheme has cost taxpayers £16.5bn since 2012, an average of around £3.8m a day, fresh analysis of official data shows. There is another £28.7bn still to pay before the scheme finally ends.
It comes after The Telegraph exposed several incidents of waste and mismanagement across the UK's public sector pension schemes. The NHS was found to have lost £5.6m by sending money to dead pensioners that cannot be recovered and the Government has spent £1.25bn bailing out the Environment Agency's pension scheme.
Royal Mail had been facing difficulties since the turn of the century, as the rise of email and the internet affected demand for posting letters.
In 2010, the coalition government started making the argument for privatisation and two years later, Royal Mail was separated from the Post Office.
To prepare for privatisation, the Government also assumed responsibility for the Royal Mail Pension Plan's deficit and most of its pensions in April 2012.
Retirement payments accrued up to this date were moved into the newly created Royal Mail Statutory Pension Scheme. However, the Government did not use the scheme's existing funds to make investments for future pension payments.
Instead, Parliament has since voted on the amount needed each year, and the pensions are then paid in full – leaving the taxpayer to foot the bill.
Neil Record, a former Bank of England economist, said: 'The Government promised index-linked pensions to a large group of employees, then took the £29bn that sat in the pension fund and spent it.
'Out of the blue, a new unfunded liability of approximately £50bn emerged solely to allow the Government to sell off the Royal Mail.
'That £50bn is saddling future taxpayers with the obligation to repay this debt.'
The scheme is closed, meaning no one else can join and no more contributions are added. It will run for as long as there are members drawing a pension.
The cost of the scheme has risen from £1.2bn back in 2012-13 to £1.6bn last year. The scheme forecasts that this will rise to £1.7bn this year.
Almost 204,000 retirees are already receiving payments, while another 145,000 have built up pensions and are still working.
The pensions on offer provide a guaranteed, inflation-linked income for life, and many come with a tax-free lump sum.
Royal Mail's privatisation began in 2013 and was completed by 2015. Current workers are members of the Royal Mail Pension Plan and have earned contributions towards retirement pots, rather than final salary pensions, since 2018. The scheme's latest valuation showed a surplus of over £1bn.
In October last year, the company then became the first in Britain to offer a collective pension fund, similar to those in Canada and Denmark.
It is currently in the middle of a takeover bid from Czech billionaire Daniel Kretinsky.
The Cabinet Office, which is responsible for the closed scheme, declined to comment.
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