1. The Future Challenge on Pensions

2. UK Pension Funds  PENSION FUND DEFICITS  FRS 17

3. UK Occupational Pension Scheme Funding Crisis Top 5 (FRS 17) reported deficits 2005  BT £5.14bn  BAE £4.33bn  Lloyds TSB£3.19bn  RBS£2.85bn  Uniliver£2.8bn FT350 Companies (FRS 17) deficit £93 bn l

4. Future Threat Recent NAPF survey found 80% of Companies who still offer Final Salary Schemes are planning to close them to new members within the next five years l

5. Retirement Age – Public Sector “Turner” Commission calls for increase in retirement age beyond 65 Age 67 being recommended Change in Legislation October 2006 l

6. Public Sector Public Sector Pensions under attack Government propose to withdraw final salary scheme – introduce retirement age of 65 Agreement to maintain age 60 retirement for existing civil servants Move to an average earnings scheme arrangement Introduce flexibility when pension can be taken Royal Mail is in this mix !! l

7. Royal Mail Fund Some Facts Royal Mail Accounts deficit £4.26bn FRS17 Scheme (Actuary) deficit £2.56bn (2003) l

8. Value of assets at today’s date £20bn Value of liabilities at today’s date £21.5bn l

9. Royal Mail Fund Royal Mail’s contribution last five years 2000=£135m 2001=£201.9m 2002=£222.9m 2003=£248.4m 2004=£647.9m 2005=£670m Total£2.12bn l

10. Contribution and Mortality Contributions Employer – 12.6% Employee – 6% Mortality Royal Mail Pension Plan 1991/94Age 79 2003/05Age 82.5 2006 Valuation Mortality rate will have effect on scheme funding l

11. Postcomm - Pension On-going pension contribution.13.8% of pensionable pay Funding of deficit £274m (03/04) up rated in line with RPI £296m (06/07) Deficit paid over 17 years Total deficit to whole of Royal Mail group £370m (06/07) Postcomm allowed £700m to deal with mortality increase l

12. CWU Policy Maintain Final Salary Scheme Remove lower earning deduction £3328 Maintain retirement age 60 l

13. Summary Maintain Final Salary Scheme Retirement Age Lower Earning Deduction RM Scheme in Deficit l