Pensions

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The Government is under pressure to explain how it will cope with the Royal Mail's £10bn pension fund deficit after it abandoned plans to sell off part of the service.

Announcing that the economic situation meant a suitable partner for the postal service could not be found, Lord Mandelson told peers: "The pension remains a matter for the company and the pension trustees."

He said the Government had to be fair to taxpayers.

"They cannot expect them to take responsibility for the deficit if the other challenges facing Royal Mail are not also addressed," he told the House of Lords.

Downing Street confirmed this was the Government position today saying ministers would not "cherry-pick" parts of the modernisation plan for the Mail.

Last month the chairman of Royal Mail warned that without part-privatisation, the pension scheme would have to be closed to existing members.

Donald Brydon told the Times: "I don't think they would be pleased, but this is reality.

"The government will not bail out the pension fund and employees if the bill is not passed," he said.

Jane Newell, chair of the Royal Mail's pension fund, warned the Business Secretary earlier this year that there would be "very severe consequences" for the pension scheme and Royal Mail if privatisation did not take place.

The trustees are now seeking meetings with the Government to discuss the security of workers' pensions.

"The Trustee is very disappointed that the pension solution which the Hooper recommendations and the Postal Services Bill addressed has now been deferred," they said in a statement.

The Communication Workers Union which represents postal workers is calling on the Government to take responsibility for the pension deficit.

It will hold a series of walkouts next week over the plans to modernise the service.