EP UK Bidco has agreed to continue working with Royal Mail and the trustee of the Royal Mail Collective Pension Plan (RMCPP) to bring about the launch of the scheme as "soon as reasonably practicable", with hopes for the scheme to launch in October 2024.

Royal Mail owner, International Distribution Services (IDS), has agreed a bid from the board of directors of EP UK Bidco Limited, a newly formed company owned indirectly by EP Corporate Group and J&T Capital Partners, which valued the group at around £5.3bn.

Details of the offer confirmed that Bidco does not intend to make any changes to the benefits provided by the Defined Benefit Cash Balance Section of the Royal Mail Pension Plan (DBCBS) or the Royal Mail Defined Contribution Plan (RMDCP).

As part of the contractual commitments included in the agreement, the IDS board also agreed that, to the extent that the RMCPP has not been fully launched by completion of the acquisition, EP will use "all commercially reasonable endeavours" to continue working with Royal Mail and the trustee of the RMCPP to bring about the launch as soon as reasonably practicable.

Initially announced in 2018, the RMCPP became the UK's first collective defined contribution (CDC) scheme in 2023 after passing The Pensions Regulator's assessment process, in what was highlighted as a "milestone" moment for the pensions industry.

Although the scheme has not yet been launched, EP Bidco's cash offer revealed that Royal Mail plans to launch the RMCPP fully in October 2024, at which point accrual under the RMDCP and DBCBS is intended to cease.

However, EP Bidco agreed that, in the meantime, the rate of benefit accrual in the DBCBS and the rates of contribution to the RMDCP will be no lower than those that apply as at the date of the agreement.

In addition to this, EP Bidco committed to instruct Royal Mail to ensure that contributions are then paid to that plan at rates agreed with the relevant plan's trustees and representatives of employees, subject to applicable law and the relevant plan's governing documentation.

EP Bidco also agreed to ensure that Royal Mail does not utilise any amount of surplus refunded from its the Royal Mail Pension Plan (RMPP) to the scheme employer for the purposes of financing, funding or declaring any return of value by Royal Mail.

Commenting on this announcement, IDS chair, Keith Williams, said: "IDS has the potential to become a leading international logistics player.

"Both the IDS Board and EP are acutely aware of their responsibilities to IDS and particularly to the unique heritage of Royal Mail and its obligations as the designated Universal Service Provider of postal services in the UK.

"The IDS Board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards.

"These cover the provision of the one-price-goes-anywhere Universal Service Obligation (including First Class letters still delivered six days a week), the financial stability and maintenance of the IDS Group including Royal Mail, the maintenance of employee benefits and pensions, and ensuring Royal Mail remains headquartered and tax resident in the UK.

"It is the IDS Board's belief that EP will continue to enhance IDS' investment in strategic areas such as network and out-of-home solutions.

"The IDS Board believes that the offer from EP is fair and reasonable given that there are uncertainties ahead and allows investors to realise value at a significant premium."

A spokesperson for the RMPP added: “The RMPP is responsible for safeguarding the interests of the RMPP’s 123,331 members and as such is a key stakeholder in Royal Mail Group Limited, the sponsoring employer of the plan.

"We note the formal cash offer made by EP Corporate Group for IDS (the parent company for Royal Mail Group), which the IDS Board have recommended to shareholders.

"The trustee also notes the terms and conditions attached to the agreement and is reviewing these, in detail, with its advisers, to ensure that RMPP members’ interests are protected. We remain in active dialogue with IDS and now look forward to a constructive dialogue with the bidder.”

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