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The Communication Workers Union (CWU) will ballot its members on strike action over Royal Mail's plans to close its defined benefit (DB) scheme.

The union has been locked in negotiations with the company for several months over various proposals to replace the Royal Mail Pension Plan (RMPP) from next year. However, it has now concluded that "sufficient progress has not been made" and will serve notice to the postal service of its intention to ballot members.

Royal Mail has said the DB scheme will become unaffordable from next April, when it expects contributions to surge from 17% to 50% of pensionable pay, eating up the £1.1bn actuarial surplus it recoded in its 2015 valuation.

The potential strike, which also concerns pay and job security, will be decided by over 100,000 members of the union nationwide who work for Royal Mail. The ballot will open on 14 September, and run for two-and-a-half weeks.

In a video to members, deputy general secretary for postal Terry Pullinger said:

"After very serious consideration, it is the view of the postal executive, that sufficient progress has not been made. Unfortunately we've not been able to shift the employer on some of the key principal issues affecting your employment, standard of living and retirement security, and as a consequence we will absolutely be serving notice of our intention to ballot members in Royal Mail Group."

Pullinger said the company had changed its direction since privatisation and had gone back on promises made when it was moved from public to private hands in 2012.

"It has shown itself by an attack on your pensions," he continued. "The failure of the company to even make a genuine pay offer despite the fact that year-on-year we've made efficiency savings consistent with that desired by the regulator, and enabled this company to be profitable enough to increase year-on-year the returns of shareholders, but seemingly not sufficient enough to give your proper reward."

The company has put forward a ‘cash balance' scheme which would guarantee members a lump sum on retirement, based on total contributions of 19.6%, with further increases possible depending on investment performance.

However, the CWU, which proposed an alternative "risk-sharing" solution that would be extended to the company's current defined contribution (DC) members, dismissed the idea in July. It has been negotiating with Royal Mail, and last month extended its deadline before holding a ballot on industrial action.

The CWU's proposal would see the company's DC and DB schemes merged, with all 132,000 members receiving a guaranteed wage in retirement, which could be uplifted in line with inflation depending on investment performance.

A spokesperson for Royal Mail said the company was still committed to finding a solution.

"Royal Mail is very disappointed that the CWU has announced it will issue a formal notice to ballot for industrial action," they said. "We believe there are no grounds for industrial action. We remain committed to reaching a negotiated agreement with the CWU on pay and pensions, and other issues we have been discussing.

"We know how important pension benefits are to colleagues. We have moved a long way compared to our original DC proposal. We previously announced that we are offering to replace the current DB scheme, with another type of DB scheme, a cash balance scheme. It would be by far the best pension in the delivery industry. It benchmarks very well compared to other large companies."

The spokesperon said the company had given the CWU's proposal "careful consideration" and had incorporated elements into its cash balance scheme. They said the CWU's scheme would be invested in too risky assets, would cost more than it could afford, and the liabilites of the scheme could swell to more than four times the value of the company today, rising to £18bn within 20 years.

The CWU's ballot, which closes on 3 October, follows a similar vote held by Royal Mail's other union, Unite, in which members narrowly rejected the deal.

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