Financial position under pressure
The turbulence on the financial markets has severely impacted the coverage ratios of the pension funds. As a result of this the coverage ratio of the largest pension fund of PostNL dropped this autumn to 96%. Underfunding in PostNL’s pension funds had increased to almost 500 million euros by the end of September 2011. Under the current arrangement, PostNL will need to supplement its share of this deficit within a period of three years. Developments on the financial markets will also lead to an increase in the regular premium contributions the company has to pay. To add to this, the share price of TNT Express, in which PostNL retained a 29.9% stake after the demerger, has declined significantly, placing PostNL’s financial position under pressure.
In response to these unforeseen circumstances and their far-reaching effects, contrary to its earlier promises to its shareholders, PostNL has decided not to pay out dividend in cash for the time being. The investment budget has also been cut back, delaying investments required for growth and diversification of PostNL.
According to PostNL CEO Harry Koorstra, “PostNL will enter into a dialogue with the pension funds and the trade unions to discuss changes to the pension arrangements. The current arrangements put too much financial pressure on the company. Clearly, we want a good, sustainable pension arrangement for our employees. However, this must be more in line with the realities of today. We recognise the impactful nature of these steps and the unfortunate timing, but they are unavoidable under the present circumstances."
Current pension arrangements untenable
Aside from the long-term interest-rate trend, the problematic pension situation has also been caused in part by the unusual position of PostNL’s pension arrangements. For an average employee, PostNL pays a regular premium contribution of about 35% to the pension fund. Other companies in the Netherlands pay a premium contribution of between 20 and 25% on average. Another aspect that sets PostNL apart is that most of its employees do not personally pay a premium contribution to the pension fund. Furthermore, there is no cap on PostNL’s obligation to top up the pension deficit.
Affordable pension arrangements
Today, 19 December, PostNL will discuss with the pension funds the need to adjust the pension arrangements. The objective is to come to arrangements in which the costs are more manageable for the employer and are in better balance with the total pension costs.
In addition, PostNL will inform today the trade unions on the current situation
In the first quarter of 2012, during the next round of collective bargaining, PostNL will discuss with the trade unions its proposals to adjust the pension arrangements. In these proposals, PostNL will take as much into account as possible of the consequences for employees affected by the current reorganisations.
The Board of Management and senior managers at PostNL with a personal contract of employment will already be personally paying pension contributions starting 1 February 2012.
In case of discrepancies between the Dutch and English versions of this press release, the Dutch version will prevail.