Royal Mail has confirmed the Royal Mail Pension Fund will close to future accrual on 31 March 2018.
The latest valuation of the Royal Mail Pension Plan showed the scheme as at 31 March 2015 had assets of £6.15bn and liabilities of £4.45bn.
The company said on this basis, the cost of benefits being accrued each year, based on market conditions at the end of March 2017, would currently be around £1.3bn.
This is significantly greater than the total annual contributions of around £400m that the company and employees make.
Accordingly, it expects that the actuarial funding surplus would be exhausted during 2018 if the plan had remained open in its current form.
After this time, the annual cost would be more than double the current contributions, which, Royal Mail bosses believe, is unaffordable for the company.
In accordance with the new schedule of contributions, the company contribution rate will remain at 17.1 per cent of members' pensionable pay until 31 March 2018.
Following announcement of the closure, the union representing Royal Mail employees has called for the firm to devise a new pension scheme that shares the risk between the business and the workers.
Most FTSE 100 companies have or are in the process of closing their final salary schemes as increasing longevity, rising costs and high volatility take their toll.
Penny Cogher, pension lawyer at Irwin Mitchell, said: "Open final salary schemes are looking increasingly anachronistic.
"Royal Mail's decision to close its one is only the action that any modern employer has to take to remain competitive.
"The real question is why was it forced to keep the scheme open for so long."
stephanie.hawthorne@ft.com
