plonkee money an english-er's thoughts on personal finance

October 9, 2007

striking for a better deal prolongs the inevitable

Filed under: education and career — plonkee @ 12:00 pm

There’s a series of postal strikes on at the moment. This has both up and downsides. On the upside, there aren’t any bills coming in. On the downside, I’m waiting for a parcel from a swap.

The reason that there’s a strike is to do with the pay and pension deal being offered to the workforce of Royal Mail isn’t as good as they want. Undoubtedly, as in every pay negotiation, the employer (the role being played by senior management at Royal Mail) want to pay as little as they can get away with and the employee (being played by the Communication Workers Union) want to get as large a package as possible.

In this particular dispute, there are two factors to note. Firstly Royal Mail is not generally held to be in good financial shape. Secondly, it is proposed that the pension package for employees be significantly reduced. Royal Mail has a lot of employees, naturally, and they have a generous final salary pension scheme, involving retirement at 60.

As with all schemes of this nature, the writing is on the wall. With longer life expectancies, there are very few (if any) private companies that can sustain such schemes and even fewer for whom this makes any sort of business sense. The only reason it can be done in the public sector is that it comes from taxes, and Royal Mail is no longer in public sector and is now expected to pay its own way.

I have some sympathy for the workforce. They don’t want to lose a good deal on their pension and take a barely matching inflation payrise. Its also true that the top executives at Royal Mail have excellent compensation packages. Striking to get a better deal is a perfectly legitimate tactic on the part of the union, and it seems likely to me that they will do a little better than the current deal.

At some point, however, you need to face reality – as does everyone else. Money doesn’t grow on trees. If everyone else is having to contribute a lot more than they thought to ensure a solid retirement then there’s a very good chance that you are going to have to do so too. You may as well start now, by putting some extra money away in an ISA, pension, or other tax-advantaged fund – after all, having more set aside is likely to be a good thing.

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