Royal Mail Statutory Pension Scheme
Annual Report and Accounts 2021–22
HC 516
Royal Mail Statutory
Pension Scheme
Annual Report and Accounts
2021–22
(For the year ended 31 March 2022)
Accounts presented to the House of Commons pursuant to Section 6(4) of the Government
Resources and Accounts Act 2000
Ordered by the House of Commons to be printed on 19 July 2022
HC 516
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Royal Mail Statutory Pension Scheme 2021-22
4
Contents
Page
Accountability Report
Corporate Governance Report
Report of the Manager
5
Report of the Actuary
12
Statement of Accounting Officer’s responsibilities
16
Governance Statement
17
Parliamentary Accountability and Audit Report
Statement of Parliamentary Supply
Losses and Special Payments Disclosure
The Certificate and Report of the Comptroller and Auditor General to the
House of Commons
22
24
25
Financial Statements
Statement of Comprehensive Net Expenditure
29
Statement of Financial Position
30
Statement of Changes in Taxpayers’ Equity
31
Statement of Cash Flows
32
Notes to the Scheme’s financial statements
33
Royal Mail Statutory Pension Scheme 2021-22
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Accountability Report
Corporate Governance Report
Report of the Manager
1. Introduction
This report provides key information on the Royal Mail Statutory Pension Scheme (“RMSPS”) (“the Scheme”)
including ongoing developments and other information for members.
2. The Scheme, its objectives and strategy
With effect from 1 April 2012 and under the provisions of the Postal Services Act 2011 (Transfer of Accrued
Pension Rights) Order 2012, which received Royal Assent on 13 June 2011, the Government assumed
responsibility for both the Royal Mail Pension Plan (“RMPP”) deficit and the majority of the RMPP’s liabilities.
Following this transfer of responsibility, the RMSPS was established to provide retirement and death benefits
to former members of the RMPP and their dependants, in respect of their service up to 31 March 2012.
The RMSPS is a statutory scheme as defined under Section 26(1) of the Finance Act 1970 and is a registered
scheme under the Finance Act 2004.
There are no investment arrangements within the RMSPS to meet the liabilities of the Scheme. Future
benefits will be paid out of the consolidated fund, to the extent that Parliament votes on the necessary funds
as requested by the Cabinet Office.
3. Main features of the Scheme
The RMSPS is an unfunded, defined benefit scheme. The Scheme is closed to new members and the accrual
of new benefits, consequently there are no employer or employee contributions.
There are two primary benefit structures within the RMSPS which are set out in Schedule 1 of the Postal
Services Act 2011 (Transfer of Accrued Pension Rights) Order 2012:
• Section A members (those who joined the Scheme before 1 December 1971) and section B members
(those who joined between 1 December 1971 and 31 March 1987) are entitled to a pension and an
automatic lump sum on retirement (with the option to exchange their pension for an additional lump
sum or vice versa, subject to Her Majesty’s Revenue and Customs (HMRC) limits); and
• Section C members (those who joined after 31 March 1987) are entitled to a pension on retirement,
with the option to exchange their pension for a lump sum up to HMRC limits.
The Scheme has three main categories of membership:
• pensioners (those members who are receiving a pension);
• deferred members (those members who have left pensionable service in the RMPP prior to 31 March
2012 but are not yet receiving their pension); and
• active deferred members (joint members) (those members who were in RMPP pensionable service
as at 31 March 2012 and continued in RMPP pensionable service).
The Scheme has some dual members, i.e. members with two benefits entitlements. This arose when the rules
on normal retirement age (NRA) changed from 60 to 65, known as NRA60 and NRA65.
Royal Mail Statutory Pension Scheme 2021-22
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4. Changes in benefits
Active deferred members differ from deferred members in that their deferred pension entitlements held in the
RMSPS receive revaluation based on the Retail Price Index (RPI) while they are still employed by the Royal
Mail or Post Office. During the year, eligible active deferred benefits were increased by 1.1% on 12 April 2021,
reflecting the change in RPI for the year ended September 2020. Once active deferred members leave RMPP
service and become deferred members, revaluation for section A and B members is based on the Consumer
Prices Index (CPI). Section C members continue to receive revaluation based on the RPI.
For section A and B members, in accordance with scheme regulations, eligible pensions in payment and
deferred benefits were increased on 12 April 2021, reflecting the 0.5% increase in the CPI for the year ended
September 2020. No discretionary increases were awarded.
For section C members, in accordance with scheme regulations, eligible pensions in payment and deferred
benefits were increased by 1.1% on 12 April 2021, reflecting the change in the RPI for the year ended
September 2020, which is limited to a maximum increase of 5.0%. No discretionary increases were awarded.
5. Management of the Scheme
Under the Postal Services Act 2011, the Minister for the Civil Service (currently the Prime Minister) is
the Scheme Manager. In practice, this responsibility is delegated to the Minister for the Cabinet Office,
and the Permanent Secretary for the Cabinet Office is the Accounting Officer of the Scheme.
The Cabinet Office is ultimately responsible for ensuring that the Scheme operates effectively. The day-
to-day administration is carried out by Capita Pension Solutions Ltd (formerly Capita Employee Benefits
Ltd), under a contract managed by the Cabinet Office.
The Cabinet Office retains direct management of:
• maintenance of scheme rules;
• complaints made under the second stage of the internal dispute resolution procedures and responses
to referrals from the Pensions Ombudsman;
• ensuring appropriate audit programmes and risk management frameworks are in place;
• certain discretionary decisions on behalf of the Minister for the Civil Service; and
• scheme finances, including the production of the annual accounts.
6. Cabinet Office and the administrator
The Cabinet Office oversees the delivery of scheme administration through a formal contract.
Under the contract, the administrator is responsible for day-to-day administration, including:
• providing administration for deferred, active deferred and pensioner scheme members, including
paying pensions and death benefits;
• maintaining accurate and secure records and a proper audit trail of all transactions;
• investigating and responding to complaints made by scheme members, including any made under the
first stage of the internal dispute resolution procedures;
• pursuing and reclaiming any overpayments of benefits;
• calculating and paying annual pension increases;
• deducting and paying over tax to HMRC;
• issuing annual current value statements;
• operating a payroll bank account; and
• producing financial and management reports.
Royal Mail Statutory Pension Scheme 2021-22
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7. Financial review
The total pension liability at 31 March 2022 is £50.9 billion (31 March 2021: £48.6 billion). This relates to
benefits accrued before 2012 for qualifying members, and their beneficiaries, of the RMPP as at 31 March
2022.
The net expenditure for the year was £0.6 billion (2020–21: £0.9 billion) and consists solely of the pension
financing cost. The expenditure has decreased by £0.3 billion as the interest cost is lower this year following a
reduction in the nominal discount rate which decreases the interest cost in 2021–22.
Total benefits of £1.4 billion (2020–21: £1.4 billion) were payable in the year in respect of pensions,
commutations, lump sums and death benefits. Total transfers out of £3.2 million (2020–21: £4.4 million) were
payable in the year.
During the year, a net actuarial loss of £3.1 billion (2020–21: £0.2 billion actuarial loss) was incurred and has
been included within Other Comprehensive Net Expenditure. The actuarial loss has been driven by the higher
than assumed pension increases, which has increased the scheme liability and results in an experience loss.
The notional cost of the audit is £50,500 (31 March 2021: £52,000). This fee reflects only those costs that are
directly associated with the audit of these financial statements and is incorporated in the Cabinet Office
Financial Statements.
The total number of scheme members decreased from 371,559 at 31 March 2021 to 361,868 at 31 March
2022.
The financial statements and accompanying notes set out the Scheme’s expenditure for the year ended 31
March 2022 and its financial position and cash flows.
8. Reconciliation of net cash requirement to estimate
There was a £33.6 million variance between the estimated cash requirement of £1,488.0 million and the
outturn of £1,454.47 million. This is primarily due to the estimate incorporating cover for the risk of a small
fluctuation in the incidence of retirements from month to month.
Trend analysis
The table below represents a five-year summary of the movements in the Scheme’s outturn analysed by
budget type.
Type of spend (£bn)
2021–22
Outturn
2020–21
Outturn
2019–20
Outturn
2018–19
Outturn
2017–18
Outturn
Net expenditure
0.6
0.9
1.6
1.2
1.3
Net cash
1.5
1.4
1.4
1.4
1.4
Net expenditure has been decreasing over the last three years due to the reduction in the nominal
discount rate. Net cash has remained consistent over the last five years.
The pension finance cost for the past 5 years is shown below.
2021–22
£bn
2020–21
£bn
2019–20
£bn
2018–19
£bn
2017–18
£bn
Pension
finance cost
0.6
0.9
1.3
1.2
1.3
The pension finance cost remained relatively static until 2019–20 where it decreased in line with the
discount rate which fell from 2.90% in 2019–20 to 1.25% in 2021–22.
Royal Mail Statutory Pension Scheme 2021-22
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The main estimate cash requirement for 2022–23 is broadly in line with outturn for 2021–22 and shown
in the table below.
2022–23
Main estimate
£bn
2021–22
Outturn
£bn
Net resource requirement
0.9
0.6
Net cash
1.5
1.5
9. Guaranteed Minimum Pension (GMP) equalisation and indexation
2016 saw the introduction of the new State Pension which simplified the pension system but removed the
mechanism whereby pension schemes and the Department for Work and Pensions (DWP) shared the cost of
indexing pension payment for members in employment between 1978 and 1997 with a GMP entitlement who
reached State Pension age after April 2016.
The Government implemented an ‘interim solution’ of having public service pension schemes fully index
GMPs for members reaching State Pension age after April 2016, and conducted a consultation on how it
proposes to ensure it continues to meet these past commitments to public service employees.
The consultation response was published on 23 March 2021, and the Government has decided to make full
GMP indexation the permanent solution for scheme members with a GMP reaching State Pension age
beyond 5 April 2021, in addition to members who reached State Pension age after April 2016. A past service
cost was included in the 2019–20 accounts to reflect the additional liabilities accrued for affected members,
and represented the full expected cost of GMP indexation, therefore no further allowance or adjustment is
required in the 2020–21 accounts.
A project to correct GMP indexation applied incorrectly to certain members’ records transferred from the
previous administrator was completed during the year. Separately to this project, further GMP work projects
being undertaken include (a) reconciliation and rectification of members' GMP records held by the Scheme
with that held by HMRC and (b) equalisation of Section C members’ GMP records. These further projects are
expected to be completed by December 2023.
Royal Mail Statutory Pension Scheme 2021-22
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10. Membership statistics
Deferred pensioners
(including active deferred – single status only)
31 March 2022
31 March 2021
At 1 April
156,195
164,739
Adjustment*
(1,545)
(442)
Full retirements
(5,361)
(5,194)
Deaths
(279)
(375)
Transfers
(10)
(3)
Partial retirements (i.e. from single to dual status)
(2,595)
(2,530)
At 31 March
146,405
156,195
Dual status pensioners (deferred members with
part benefits in payment)
31 March 2022
31 March 2021
At 1 April
16,537
15,770
Adjustment*
(165)
3
Full retirements
(1,900)
(1,690)
Deaths
(80)
(76)
Partial retirements (i.e. from single to dual status)
2,596
2,530
At 31 March
16,988
16,537
Pensioners
31 March 2022
31 March 2021
At 1 April
198,827
198,260
Adjustment*
(1,292)
345
Full retirements
7,039
7,112
Trivial commutations
(567)
(228)
New dependants
2,736
2,327
Pensioner payment ceased
(1,033)
(741)
Deaths
(7,235)
(8,248)
At 31 March
198,475
198,827
Total
361,868
371,559
* Adjustments are needed to the membership movement to reflect differences in reporting following the
administration transition and late notifications to the administrator.
11. Additional voluntary contributions (AVCs)
There are no additional voluntary contributions allowed within the RMSPS. AVC funds are retained in the
RMPP, but active deferred members are allowed to spread their AVC benefit entitlement across both
schemes.
12. Scheme records
The administration of the Scheme was transferred from the Royal Mail Pension Service Centre (PSC) to
Capita in 2018. An interface solution was implemented to allow the flow of member data between Capita and
PSC to facilitate case processing of retirements and other benefits for active deferred members.
A data sharing agreement is in place with Royal Mail Pension Trustees Ltd which provides a basis for the
sharing of data and maintains a good service for active deferred members.
Royal Mail Statutory Pension Scheme 2021-22
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13. Scheme developments
The communication and engagement strategy continued with the objective to help joint members understand
how their benefits are split between the RMSPS and the RMPP and what to expect from the two
administrators. The RMSPS website and online portal were promoted to members so that they are able to
access scheme information on any digital device when they choose and are provided with a smooth
experience.
We communicated our intention for the Scheme to go paperless in the near future to all members of the
RMSPS. This aligns with our digital strategy to reduce our carbon footprint and ‘build back greener’. The
option of receiving a hard copy will still be available for those who wish to opt out of electronic communication.
Monthly liaison meetings were held with the RMPP Trustee Executive to share knowledge and align scheme
communications across the two schemes.
There were no changes to the Scheme rules during the year. Royal Mail is planning to introduce a new
collective defined contribution scheme to replace the RMPP. This is not expected to have a significant impact
on RMSPS.
14. Reporting of personal data related incidents and data security
Any breaches of General Data Protection Regulations (GDPR) are monitored by the Cabinet Office, and there
have been no instances of loss of protected personal data reported to the Information Commissioner’s Officer
in 2021–22.
In line with the GDPR and the Data Protection Act 2018, the Scheme has ensured that:
• contracts with suppliers are amended to ensure that data is processed, by data processors, in accordance
with the legislation;
• robust reporting mechanisms are in place; and
• a scheme data management policy and privacy notices are in place.
Capita’s information technology infrastructure is monitored through a joint security working group which meets
monthly to discuss any security issues.
15. Actuarial position
The Scheme’s liabilities as at 31 March 2022 were calculated by the Government Actuary’s Department
(GAD, the appointed actuary to the Scheme) in accordance with ‘International Accounting Standard 19
Employee Benefits (IAS 19)’ and the requirements of Chapter 9 of the 2021–22 version of the ‘Government
Financial Reporting Manual (FReM)’. This assessment was completed using full scheme data as at
31 March 2018, updated on an approximate basis by the Government Actuary’s Department to reflect
changes that have occurred up to 31 March 2022.
16. Events after the reporting period
There have been no material events between the Statement of Financial Position date and the date the
financial statements were authorised for issue.
The Accounting Officer of the Scheme has authorised these accounts to be issued on the date that the
Comptroller and Auditor General (C&AG) certifies the accounts.
17. Auditor
These financial statements have been audited by the C&AG, whose opinion is expressed in the certificate and
report of the C&AG to the House of Commons.
Royal Mail Statutory Pension Scheme 2021-22
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18. Managers, advisers and employers
Managers
Accounting Officer of the Scheme:
Alex Chisholm, 70 Whitehall, London SW1A 2AS
Scheme Manager at the Cabinet Office:
Dominic Arthur, Cabinet Office, 70 Whitehall, London SW1A
2AS
Scheme administrator
Address for correspondence:
Capita Pension Solutions Ltd, Hartshead House, 2 Cutlers
Gate, Sheffield S4 7TL
Advisers
Scheme Actuary:
Government Actuary’s Department, Finlaison House, 15–
17 Furnival Street, London EC4A 1AB
Principal bankers:
Royal Bank of Scotland, 36 St Andrew Square, Edinburgh
EH2 2YB
Legal advisers:
Government Legal Department, 102 Petty France, London
SW1H 9GL
Auditors
External Auditors:
Comptroller and Auditor General, National Audit Office, 157–
197 Buckingham Palace Road, London SW1W 9SP
Internal Auditors:
Government Internal Audit Agency, 10 Victoria Street, London
SW1H 0NB
Employers
The following employers participated in the Scheme:
• Royal Mail Group; and
• Post Office Ltd.
19. Disclosure of audit information
As Accounting Officer, as far as I am aware there is no relevant audit information of which the Scheme’s
auditor is unaware. I have taken all the steps that I ought to have taken to make myself aware of any relevant
audit information and to establish that the Scheme’s auditor is aware of that information.
As Accounting Officer, I confirm that the Annual Report and Accounts as a whole are fair, balanced and
understandable, and that I take personal responsibility for them and for the judgements required for
determining that they are fair, balanced and understandable.
______________________
Alex Chisholm
Principal Accounting Officer and Permanent Secretary
13 July 2022
Royal Mail Statutory Pension Scheme 2021-22
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Report of the Actuary
Royal Mail Statutory Pension Scheme
Accounts for the year ended 31 March 2022
Introduction
1. This statement has been prepared by the Government Actuary’s Department (GAD) at the request of
the Cabinet Office . It provides a summary of GAD’s assessment of the Scheme liability in respect of
the Royal Mail Statutory Pension Scheme (RMSPS) as at 31 March 2022, and the movement in the
Scheme liability over the year 2020–21, prepared in accordance with the requirements of Chapter 9 of
the 2021–22 version of the Financial Reporting Manual.
2. The RMSPS is a closed, defined benefit scheme providing pension and lump sum benefits on
retirement and death. The Scheme is wholly unfunded. I am not aware of any informal practices
operated within the Scheme which lead to a constructive obligation.
3. The assessment has been carried out by calculating the liability as at 31 March 2018 based on the
data provided as at 31 March 2018 and rolling forward that liability to 31 March 2022.
Membership data
4. Table A summarises the principal membership data as at 31 March 2018 used to prepare this
statement.
Table A – Membership summary
Category
Number of members
(single + dual)
Total pension as at 31
March 2018 (£ million)*
Active deferred
85,028
459
Deferred pensioner
110,452
369
Pensioner
205,988
1,118
* Including pension increases awarded in April 2018. Does not include NPA65 pension that is not yet
in payment for dual status members.
Methodology
5. The present value of the liabilities as at 31 March 2022 has been determined using the Projected Unit
Credit Method (PUCM), with allowance for demographic and financial assumptions applying as at 31
March 2022.
6. This statement takes into account the benefits normally provided under the Scheme, including age
retirement benefits, ill-health retirement benefits and benefits applicable following the death of the
member.
Royal Mail Statutory Pension Scheme 2021-22
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Principal financial assumptions
7. The principal financial assumptions adopted to prepare this statement are shown in Table B.
Table B – Principal financial assumptions
Assumption
31 March 2022 p.a.
31 March 2021 p.a.
Rate of return (discount rate)
1.55%
1.25%
Rate of future pension increases
(Consumer Prices Index, or CPI)
2.90%
2.22%
Real discount rate in excess of:
- CPI inflation
(1.30%)
(0.95%)
Rate of RPI (Retail Price Index) inflation
until February 2030
3.90%
3.22%
Rate of RPI inflation from February 2030
3.00%
2.32%
8. The assessment of the liabilities allows for the known pension increases up to and including April
2022.
Demographic assumptions
9. Table C summarises the mortality assumptions adopted to prepare this statement, which were
derived from the specific experience of the Scheme membership. The table refers to the standard
mortality tables prepared by the Continuous Mortality Investigation (part of the Actuarial Profession)
known as the ‘S2 tables’ with the percentage adjustments to those tables derived from scheme
experience.
Table C – Post-retirement mortality assumptions
Baseline mortality
Standard table*
Adjustment
Males
Normal and ill-health retirements
S2PMA
121%
Dependants
S2PMA
115%
Females
Normal and ill-health retirements
S2PFA
118%
Dependants
S2DFA
111%
10. The assumptions in Table C above are the same as those adopted for the 31 March 2018 funding
valuation of the Scheme and the accounts as at 31 March 2021.
11. Mortality improvements are assumed to be in line with the latest 2018-based projections for the
United Kingdom published by the Office for National Statistics (ONS) in October 2019. This is the
same assumption as that used for the 2020–21 accounts.
12. The other demographic assumptions, such as for commutation and family statistics, are unchanged
from the 2020–21 accounts.
13. Our advice on the selection of the assumptions can be found in our assumptions and methodology
report dated 4 March 2022.
Royal Mail Statutory Pension Scheme 2021-22
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*No adjustment is made for pensioners who have already retired on ill-health grounds. Future ill
health retirees are assumed to be subject to the above mortality on the basis that the members were
born three years earlier than their actual date of birth.
Liabilities
14. Table D summarises the assessed value as at 31 March 2022 of benefits accrued under the Scheme
prior to this date based on the data, methodology and assumptions described in paragraphs 5 to 13.
The corresponding figures for the previous year are shown for comparison.
15. Table D – Statement of financial position
31 March
2022
£ m
31 March
2021
£ m
31 March
2020
£ m
31 March
2019
£ m
31 March
2018
£ m
Total market value of assets
nil
nil
nil
nil
nil
Value of liabilities
50,876
48,614
48,994
43,960
46,390
Surplus/(deficit)
(50,876)
(48,614)
(48,994)
(43,960)
(46,390)
of which recoverable by
employers
n/a
n/a
n/a
n/a
n/a
Accruing costs
16. Past service costs arise when an employer undertakes to provide a different level of benefits than
previously promised. I am not aware of any events that have led to a material past service cost over
2021–22.
17. I am not aware of any events that have led to a material settlement or curtailment gain or loss over
2021–22.
Sensitivity analysis
18. The results of any actuarial calculation are inherently uncertain because of the assumptions which
must be made. In recognition of this uncertainty, I have been asked to indicate the approximate
effects on the actuarial liability as at 31 March 2022 of changes to the most significant actuarial
assumptions.
19. The most significant financial assumptions are the discount rate and pension increases (currently
based on CPI or RPI). A key demographic assumption is pensioner mortality.
20. Table E shows the indicative effects on the total liability as at 31 March 2022 of changes to these
assumptions (rounded to the nearest 0.5%).
Table E – Sensitivity to significant assumptions
Change in assumption*
Approximate effect on total
liability
Financial assumptions
%
£000
(i) net discount rate increase of ½% a year
-9.0
(4,578,800)
(ii) pension increases of ½% a year
9.0
4,578,800
Demographic assumptions
(ii) additional one-year increase in life expectancy at
retirement
4.5
2,289,400
*
Opposite changes in the assumptions will produce approximately equal and opposite changes in the
liability.
Royal Mail Statutory Pension Scheme 2021-22
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COVID-19 implications
21. As with the accounts last year, the 2021–22 Resource Accounts are being produced at a time when
the UK continues to deal with the COVID-19 pandemic. I have considered the potential implications of
how this pandemic could impact on the actuarial calculations required for the Resource Accounts.
22. The assumptions for the discount rate and pension increases are specified by HM Treasury in the
PES (2021) 10, dated 13 December 2021, and remain unchanged for these accounts. The PES
assumptions reflect market conditions at the previous 30 November and are typically not amended for
any changes between November and the accounting date.
23. The 2018 population mortality projections make no specific allowance for the impact of COVID-19 or
any other pandemics. The starting rates of mortality improvement are based on projections of past
trends in UK mortality, and the effects of past pandemics will already be reflected in these trends. In
general, the effects of pandemics on mortality rates are usually expected to be short term, with rates
going back to what they would have been before the pandemic after a year or two, unless the
pandemic remains over several years. It is therefore not unreasonable to retain the existing mortality
assumptions. A death rate from COVID-19 in excess of that already allowed for in the mortality
assumptions would emerge as an experience gain in future accounting periods.
Kenneth Starr FIA
Actuary
Government Actuary’s Department
13 May 2022
Royal Mail Statutory Pension Scheme 2021-22
16
Statement of Accounting Officer’s responsibilities
Under the Government Resources and Accounts Act 2000, HM Treasury has directed the Cabinet Office to
prepare for each financial year a statement of account for the Royal Mail Statutory Pension Scheme
(RMSPS) in the form and on the basis set out in the Accounts Direction.
The financial statements are prepared on an accruals basis and must give a true and fair view of the state
of affairs of the Scheme at the year end and of the net resource outturn, changes in taxpayers’ equity and
cash flows for the year then ended. The accounts are required to provide disclosure of any material
expenditure or income that has not been applied to the purposes intended by Parliament, or material
transactions that have not conformed to the authorities which govern them.
In preparing the financial statements, the Accounting Officer is required to comply with the requirements of
the ‘Government Financial Reporting Manual (FReM)’ and in particular to:
• observe the Accounts Direction issued by HM Treasury, including the relevant accounting and
disclosure requirements, and apply suitable accounting policies on a consistent basis;
• make judgements and estimates on a reasonable basis;
• state whether applicable accounting standards, as set out in the ‘Government Financial
Reporting Manual’, have been followed, and disclose and explain any material departures in
the financial statements;
• prepare the financial statements on a going concern basis; and
• confirm that the annual report and financial statements as a whole are fair, balanced and
understandable and take personal responsibility for the annual report and financial statements
and the judgements required for determining that as a whole they are fair, balanced and
understandable.
HM Treasury has appointed the Permanent Secretary of Cabinet Office as Accounting Officer for the RMSPS.
The responsibilities of an Accounting Officer, including responsibility for the propriety and regularity of the
public finances for which the Accounting Officer is answerable, for keeping proper records and for
safeguarding the assets of the pension scheme, are set out in Accounting Officers’ Memorandum issued by
HM Treasury and published in ‘Managing Public Money’.
Royal Mail Statutory Pension Scheme 2021-22
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Governance statement
1. Scope of responsibility
As the Accounting Officer for the Royal Mail Statutory Pension Scheme during 2021–22, I have responsibility
for maintaining a sound system of governance, risk management and internal control that supports the
achievement of the RMSPS’s policies, aims and objectives, while safeguarding the public funds and
departmental assets for which I am personally responsible in accordance with the responsibilities assigned to
me in ‘Managing Public Money’. I am also required to provide assurances about the stewardship of the
RMSPS. These assurances are provided in this Governance Statement, in line with HM Treasury guidance.
2. Scheme governance
The governance arrangements of RMSPS are designed to:
• be efficient and cost effective;
• be based on a transparent and robust structure which is compliant with the Scheme rules; and
• follow relevant good practice and policy for public service schemes across government.
3. Governance: roles and responsibilities
The bodies and individuals involved in the Scheme governance are as follows:
• The Minister for the Civil Service (currently the Prime Minister) is the Scheme Manager. In practice,
this responsibility is delegated to the Minister for the Cabinet Office and me, as the Permanent
Secretary for the Cabinet Office and the Accounting Officer of the Scheme.
• The Cabinet Office Audit and Risk Committee (COARC) supports and advises me, as the
Accounting Officer, on all relevant matters concerning audit and risk.
• The Civil Service & Royal Mail Pensions Directorate, which is part of Government Business
Services within the Cabinet Office, oversees the day-to-day management of the Scheme.
• The Governance Group is an advisory group which includes member representatives, and the Chair
is appointed by the Minister for the Cabinet Office.
• The Royal Mail Pension Plan (RMPP) Trustee Executive has continued responsibility for the
ongoing RMPP which holds pension benefits for active deferred members.
• The Pensions Finance Governance Group reviews the governance statement and provides a
review of the Scheme report and accounts and other related issues.
• The day-to-day administration of the Scheme is carried out by Capita Pensions Solutions Ltd.
under a contract with the Cabinet Office operated in accordance with the Department’s internal
control framework.
4. The Cabinet Office Audit and Risk Committee (COARC)
COARC is a sub-committee of the Cabinet Office Board which supports me as the Accounting Officer on all
relevant matters concerning audit and risk.
COARC was chaired by Mike Ashley, an independent non-executive board member. All meetings were
attended by at least one other non-executive director and the Cabinet Office Chief Financial Officer.
Scheme discussions included reports and updates provided by Civil Service & Royal Mail Pensions, the
National Audit Office (NAO) and the Government Internal Audit Agency (GIAA) on mortality assumptions and
casework volumes.
Royal Mail Statutory Pension Scheme 2021-22
18
5. The Governance Group
The RMSPS Governance Group is an independent advisory group established as part of the RMSPS
governance chaired by an independent non-executive Chair. Its membership is based on nominations from a
range of stakeholders including the Scheme Manager, the Royal Mail Group plc, Post Office Ltd, Unions, the
National Federation of Occupational Pensioners and two independent representatives. A new Chair was
appointed in January by a Public Recruitment Exercise.
Board member
Role
Meetings
attended
Out of a
possible
Alan Pickering up to 31/12/2021 replaced
by John Cullen
Chair – Non-executive
4
4
John Cullen appointed on 01/01/2022
Chair – Non-executive
1
1
Natasha Wilson
Non-executive member
1
1
Dominic Arthur/Kerrie Cureton-Williams
/Múna Rowe
Cabinet Office official
4
4
Stephen Humphrey
HM Treasury (now independent)
3
4
Angela Gough
Royal Mail Group
3
4
Paul Wood
Post Office Ltd
2
4
John Hearn
National Federation of Occupational
Pensioners
4
4
Andy Furey
Communication Workers Union
3
4
Stephen Halliwell
Communication Workers Union
2
4
Gary Sassoon-Hales
Unite the Union
3
4
The primary functions of the Governance Group are:
• to be informed of the efficiency and effectiveness of the Scheme administration to gain assurance that
the Scheme has the appropriate oversight, governance and controls in place, and to raise any concerns
identified;
• to help inform member communication plans and products to promote effective member engagement;
and
• to consider the member experience, monitor cross-scheme issues to ensure consistency in the delivery
of services to members.
The Governance Group met four times in the year to 31 March 2022 and was presented with reports
highlighting the activities of the preceding months. These reports included:
• actual pension payments made against forecasts;
• a scheme report highlighting significant activity in the reporting period;
• a risk report highlighting key risks and their ratings;
• the number of overpayments made, recovery performance and causes; and
• the performance of Capita against agreed targets.
These reports and the data presented to the Governance Group are produced by the Scheme administrator
and reviewed by the Scheme Manager to provide the level of detail needed for effective oversight. There is no
requirement for a framework to be in place to review board performance because this is a non-statutory
governance group that operates in an advisory capacity. As a matter of good practice, however, the Chair is
expected to monitor board performance and effectiveness and no issues were noted during the year. There is
a conflict of interest policy in place, and a register of interests is maintained by the secretariat function.
Royal Mail Statutory Pension Scheme 2021-22
19
6. Cabinet Office Scheme Governance
The Cabinet Office Pensions directorate has oversight arrangements in place to monitor performance of the
Scheme administrator, including a quarterly Strategy Group and a monthly Service Delivery Group. These,
are further supported by a Finance Governance Group and a Risk and Compliance Group. The Pensions
Finance Governance Group provides proper oversight of financial management within Civil Service & Royal
Mail Pensions and discusses the content of the governance statement and report of the manager.
7. Risk management
The Cabinet Office has a risk management framework in place to ensure key risks are monitored and
effective measures are in place to mitigate them, via the joint administrator and scheme manager Risk and
Compliance Group. The main risks kept under review and monitored on an ongoing basis are:
Risk
Current position
Joint member interface discrepancies,
including joint member processes,
which could result in delays and
errors with pension payments
This risk is now close to tolerance and continues to reduce, both
due to improved working with the RMPP and due to increased
resourcing within Capita to deliver the stabilisation plan in 2021.
Further improvements to the joint member processes will continue
throughout 2022–23.
Member data and data provided
during the interface process and data
security
This is reducing in light of the data improvement plan of which
some actions have been completed and the remainder of the plan
remains under discussion. An independent data audit is also due
to complete by the end of summer 2022.
Delivering the Guaranteed Minimum
Pension (GMP) programme and the
potential for delays leading to
increased costs or inadequate
delivery of the programme
This GMP Reconciliation and Rectification project is now in flight.
This will allow for the focus to move towards the GMP Discovery
Phase Project and then the Data Analysis Project. Once member
data has been cleansed, the GMP equalisation exercise can
commence.
Failure to comply with scheme rules
or relevant laws or regulations
Issues over the last twelve months are either closed or being
managed. Controls are in place and continue to be
reviewed/strengthened. Controls include, but are not limited to:
breach and error reporting processes, regulatory training, monthly
disclosure reviews with a forward-look too all cases approaching
disclosure deadlines and workflow system recording of key
disclosure timeframes for all activities and reports on
warnings/failures.
All risks identified and reviewed during the year are recorded in a risk register which is reviewed and updated
on a monthly basis, or sooner if there is a change to the risk landscape. Where risks are outside of tolerance
levels, mitigating controls or actions are implemented to address risks and are tracked via the Risk and
Compliance Group.
Royal Mail Statutory Pension Scheme 2021-22
20
8. Key issues arising in the reporting period
Following the transition of services from the previous administrator to Capita in November 2018, there was a
backlog of casework, which was further exacerbated by the impact of the pandemic. Capita put in place a
stabilisation plan, which has addressed the backlog, and work in progress continues to be monitored.
The nature of the processing of active deferred records is inherently complex as it requires both Capita and
the Royal Mail Pension Service Centre (PSC) to work together to share data and coordinate activity. As such,
in late 2020, the Cabinet Office and the trustees of the RMPP commissioned an independent review of the
processes to identify any improvements that could be identified to allow processes to be more efficient and
improve member experience. The review identified a number of process refinements, to improve processing
times and further reduce the backlog of cases. Implementation of the recommendations from the review was
initially delayed to allow for the backlog of casework to be prioritised and reduced, and discussions have now
commenced to implement the recommendations.
9. Review of effectiveness
As Accounting Officer, I have responsibility for reviewing the effectiveness of the governance structures, risk
management and system of internal control. My review of the effectiveness of the system of internal control is
informed by the work of a number of parties. These included the Civil Service & Royal Mail Pensions
directorate within the Cabinet Office; GIAA reporting into COARC; and the external scheme auditors.
Monthly reports and the risk register are received from the administrator, and meetings are held monthly to
monitor compliance, delivery and risks. Any issues are reported to the Governance Group where appropriate.
Risks are identified through a number of mediums, such as meeting groups (the Service Delivery Review
meetings, the Risk Committee, the RMSPS Governance Group, the Security Working Group and the Scheme
Manager Risk meeting), risk workshops, horizon scanning, and ad hoc reporting from Capita to the Scheme
Manager. Risks are evaluated through workshops or via the RMSPS Risk and Compliance Group and are
continually monitored (including controls) by the second line function and through reporting to the various
meeting groups.
In considering the effectiveness of the internal controls for the Scheme, I have taken into account the findings
of the Reporting Accountants' assurance report for Capita Pensions Solutions Ltd for the year ending
December 2021. I have sought information from the administrator to aid consideration of the report's findings
and concluded that risks are suitably mitigated by the control arrangements in place.
GIAA acts as the Scheme’s overarching internal audit service. It develops an annual audit plan and provides
me with an Annual Report and Opinion on the adequacy and effectiveness of risk management, governance
and control for the Scheme as a whole. GIAA coordinates its work with Capita Group Internal Audit (Capita
GIA) and places some reliance on the work of Capita GIA to inform its annual opinion.
The GIAA Head of Internal Audit provided me with his report on internal audit activity over the reporting
period, which contains his independent opinion on the adequacy and effectiveness of the Scheme’s
governance, risk management and internal control arrangements.
For 2021–22 the Scheme received a ‘moderate’ opinion. The Scheme Manager has been working closely
with the Administrator to address some aspects of operational performance including the administration of
joint members, and is making good progress moving to a stable state.
Capita GIA developed an audit plan for 2021–22, designed so that it delivers effective and efficient
assurances to the Cabinet Office on the adequacy and effectiveness of the design and operation of Capita’s
governance, processes and controls. The plan was designed to focus on key areas of risk and the system of
internal controls under a Business as Usual (BAU) scenario. Audits carried out during the year covered user
access management, data integrity, data scoring, business continuity and IT disaster recovery.
Royal Mail Statutory Pension Scheme 2021-22
21
Capita GIA issues an Annual Statement of Assurance each year on its opinion on the adequacy of risk,
control and governance processes exercised by Capita management over the systems and processes used
to administer the RMSPS contract. Where GIA identified weaknesses, they confirmed that the Administrator
has taken appropriate measures to agree and remediate the identified weaknesses. All audit actions are
subsequently tracked by GIA until closure, with GIA independently verifying that the actions have been
adequately addressed. GIA have confirmed they are not aware of any errors, breaches or fraud, which may
cause material financial loss or reputational damage to the Scheme Manager.
______________________
Alex Chisholm
Principal Accounting Officer and Permanent Secretary
13 July 2022
Royal Mail Statutory Pension Scheme 2021-22
22
Parliamentary accountability and audit report
Statement of Parliamentary Supply – (Subject to Audit)
In addition to the primary statements prepared under IFRS, the Government Financial Reporting Manual (FReM)
requires the Scheme to prepare a Statement of Outturn against Parliamentary Supply (SOPS) and supporting
notes. The SOPS and related notes are subject to audit, as detailed in the Certificate and Report of the
Comptroller and Auditor General to the House of Commons. The SOPS is a key accountability statement that
shows, in detail, how an entity has spent against their Supply Estimate. Supply is the monetary provision (for
resource and capital purposes) and cash (drawn primarily from the Consolidated fund), that Parliament gives
statutory authority for entities to utilise. The Estimate details supply and is voted on by Parliament at the start of
the financial year.
Should an entity exceed the limits set by their Supply Estimate, called control limits, their accounts will receive a
qualified opinion. The format of the SOPS mirrors the Supply Estimates, published on gov.uk, to enable
comparability between what Parliament approves and the final outturn. The SOPS contain a summary table,
detailing performance against the control limits that Parliament have voted on, cash spent (budgets are compiled
on an accruals basis and so outturn won’t exactly tie to cash spent) and administration.
The supporting notes detail the following: Analysis of net resource outturn by estimate line (SOPS1); and a
reconciliation of outturn to net cash requirement (SOPS3).
Summary of resource and capital outturn 2021–22
Outturn
Estimate
2021–22
2020–21
Type of
spend
SOPS
Note
Voted
£000
Non-
voted
£000
Total
£000
Voted
£000
Non-
voted
£000
Total
£000
Outturn vs
Estimate,
saving
Voted
£000
Prior Year
Outturn
Total
£000
Departmental
expenditure
Limit
- Resource
-
-
-
-
-
-
-
-
- Capital
-
-
-
-
-
-
-
-
Total
-
-
-
-
-
-
-
-
Annually
managed
expenditure
- Resource
SOPS 1.1
598,631
-
598,631
699,000
-
699,000
100,369
868,982
- Capital
-
-
-
-
-
-
-
-
Total budget
Expenditure
598,631
-
598,631
699,000
-
699,000
100,369
868,982
Non-budget
Expenditure
-
-
-
-
-
-
-
-
Total Budget
and Non
budget
598,631
-
598,631
699,000
-
699,000
100,369
868,982
2021–22
2020–21
£000
£000
Note
2021–22
Outturn
£000
2021–22
Estimate
£000
Outturn
versus
Estimate,
saving
Prior
Year
Outturn
Total
Net cash requirement
SOPS3
1,454,430
1,488,000
33,570
1,439,663
Administration costs 2021–22
-
-
-
-
Royal Mail Statutory Pension Scheme 2021-22
23
Figures in the area outlined in bold are voted totals subject to Parliamentary control.
All outturn figures are classified as voted annually managed expenditure (AME) items.
Supporting explanation for variance against outturn and the net cash requirement can be found under the financial
review section of the Report of the Manager.
Although not a separate voted limit, any breach of the administration budget will also result in an excess vote.
The notes below form part of these disclosures.
Notes to the Statement of Outturn against Parliamentary Supply, 2021–22 (£000s) (subject
to audit)
SOPS1. Outturn detail, by Estimate line
SOPS1.1 Analysis of net resource outturn by estimate line
Resource Outturn
£000
Estimate
£000
2021–22
£000
2020–21
£000
Type of spend
(Resource)
Administration
Programme
Total
Virements
Total inc.
virements
Outturn vs
Estimate,
saving
Prior Year
Outturn,
total
Gross Income Net
Gross Income Net
Spending in Annually Managed Expenditure (AME)
Voted expenditure
RMSPS
- - -
598,631
-
598,631
699,000
-
699,000
100,369
868,982
Non-Voted expenditure
RMSPS
- - -
598,631
-
598,631
699,000
-
699,000
100,369
868,982
Total
spending in
AME
- - -
598,631
-
598,631
699,000
-
100,369
100,369
868,982
- - -
598,631
-
598,631
699,000
-
100,369
100,369
Total
resource
868,982
Royal Mail Statutory Pension Scheme 2021-22
24
SOPS2. Reconciliation of outturn to net operating expenditure
The total resource outturn in SOPS1 is the same as net operating expenditure in the Statement of
Comprehensive Net Expenditure, therefore no reconciliation is required.
SOPS3. Reconciliation of net resource outturn to net cash requirement
Subject to Audit
2021–22
2020–21
Note
Estimate
Outturn
Net total
outturn
compared with
estimate:
saving
Outturn
£000
£000
£000
£000
Net resource outturn
699,000
598,631
100,369
868,982
Accruals adjustments:
– Non-cash item – pension financing cost
7.4
(699,000)
(598,631)
(100,369)
(868,982)
Changes in working capital other than
cash:
– (Decrease)/increase in receivables
-
(465)
465
865
– (Increase)/decrease in payables (within 12
months)
-
(4,809)
4,809
(2,473)
Less movements in the consolidated fund
and Scheme Manager payables
-
(2,671)
2,671
412
Use of provision:
Pension
1,488,000
1,462,375
25,625
1,440,859
Net cash requirement
1,488,000
1,454,430
33,570
1,439,663
There is a £33.5 million variance from the estimated cash requirement of £1,488.0 million to the outturn of
£1,454.4 million. This is primarily due to the estimate incorporating cover for the risk of fluctuation in the
incidence of retirements from month to month.
The £100.4 million variance in the net resource outturn of £599.0 million is due to the estimate incorporating
cover for the risk of fluctuation in the resource requirement for the year.
The notional audit cost of £50,500 (2020–21: £52,000), in respect of the C&AG’s audit of the Scheme’s
financial statements for the year ended 31 March 2022, is borne by the Vote of the Cabinet Office and is
therefore not a reconciling item in the note above.
As noted in the introduction to the SOPS above, outturn and the estimates are compiled against the
budgeting framework, not on a cash basis. Therefore, this reconciliation bridges the resource and capital
outturn to the net cash requirement.
Losses and special payments
Subject to Audit
There are no losses or special payments, individually or in aggregate in excess of £300,000 which would
require disclosure during the year to 31 March 2022 (2020–21: none in excess of £300,000), or that have
been recognised since that date.
Remote contingent liabilities
(subject to audit)
There were no remote contingent liabilities during 2021–22.
Royal Mail Statutory Pension Scheme 2021-22
25
THE CERTIFICATE AND REPORT OF THE COMPTROLLER AND AUDITOR GENERAL
TO THE HOUSE OF COMMONS
Opinion on financial statements
I certify that I have audited the financial statements of the Royal Mail Statutory Pension Scheme (“the
Scheme”) for the year ended 31 March 2022 under the Government Resources and Accounts Act 2000.
The Scheme’s financial statements comprise: the combined
• Statement of Financial Position as at 31 March 2022;
• Statement of Comprehensive Net Expenditure, Statement of Cash Flows and Statement of Changes
in Taxpayers’ Equity for the year then ended; and
• the related notes including the significant accounting policies.
The financial reporting framework that has been applied in the preparation of the combined financial
statements is applicable law and UK adopted international accounting standards.
In my opinion, the financial statements:
• give a true and fair view of the state of the Scheme’s affairs as at 31 March 2022 and its net
expenditure for the year then ended; and
• have been properly prepared in accordance with the Government Resources and Accounts Act 2000
and HM Treasury directions issued thereunder.
Opinion on regularity
In my opinion, in all material respects,
• the income and expenditure recorded in the financial statements have been applied to the purposes
intended by Parliament and the financial transactions recorded in the financial statements conform to
the authorities which govern them; and
• the Statement of Parliamentary Supply properly presents the outturn against voted Parliamentary
control totals for the year ended 31 March 2022 and shows that those totals have not been exceeded.
Basis for opinions
I conducted my audit in accordance with International Standards on Auditing (UK) (ISAs UK), applicable law
Practice Note 15 (revised) The Audit of Occupational Pension Schemes in the United Kingdom and Practice
Note 10 Audit of Financial Statements of Public Sector Entities in the United Kingdom. My responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of my certificate.
Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical
Standard 2019. I have also elected to apply the ethical standards relevant to listed entities. I am independent
of the Scheme in accordance with the ethical requirements that are relevant to my audit of the financial
statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these
requirements.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my
opinion.
Conclusions relating to going concern
In auditing the financial statements, I have concluded that then Scheme’s use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Based on the work I have performed, I have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Scheme’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for
issue.
My responsibilities and the responsibilities of the Accounting Officer with respect to going concern are
described in the relevant sections of this certificate.
The going concern basis of accounting for the Scheme is adopted in consideration of the requirements set out
in HM Treasury’s Government Financial Reporting Manual, which require entities to adopt the going concern
basis of accounting in the preparation of the financial statements where it anticipated that the services which
they provide will continue into the future.
Royal Mail Statutory Pension Scheme 2021-22
26
Other Information
The other information comprises information included in the Annual Report, but does not include the financial
statements nor my auditor’s certificate thereafter. The Accounting Officer is responsible for the other
information.
My opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in my certificate, I do not express any form of assurance conclusion thereon.
In connection with my audit of the financial statements, my responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
my knowledge obtained in the audit or otherwise appears to be materially misstated.
If I identify such material inconsistencies or apparent material misstatements, I am required to determine
whether this gives rise to a material misstatement in the financial statements themselves. If, based on the
work I have performed, I conclude that there is a material misstatement of this other information, I am
required to report that fact.
I have nothing to report in this regard.
Opinion on other matters
In my opinion, based on the work undertaken in the course of the audit:
• the parts of the Accountability Report subject to audit have been properly prepared in accordance
with HM Treasury directions made under the Government Resources and Accounts Act 2000;
• the information given in the Accountability Reports for the financial year for which the financial
statements are prepared is consistent with the financial statements and is in accordance with the
applicable legal requirements.
Matters on which I report by exception
In the light of the knowledge and understanding of the Scheme and its environment obtained in the course of
the audit, I have not identified material misstatements in the Accountability Report.
I have nothing to report in respect of the following matters which I report to you if, in my opinion:
• I have not received all of the information and explanations I require for my audit; or
• adequate accounting records have not been kept by the Scheme or returns adequate for my audit
have not been received from branches not visited by my staff; or
• the financial statements and the parts of the Accountability Report subject to audit are not in
agreement with the accounting records and returns; or
• the Governance Statement does not reflect compliance with HM Treasury’s guidance.
Responsibilities of the Accounting Officer for the financial statements
As explained more fully in the Statement of Accounting Officer’s responsibilities, the Accounting Officer is
responsible for:
▪ maintaining proper accounting records;
▪ the preparation of the financial statements and Annual Report in accordance with the applicable
financial reporting framework and for being satisfied that they give a true and fair view;
▪ ensuring that the Annual Report and accounts as a whole is fair, balanced and understandable;
▪ internal controls as the Accounting Officer determines is necessary to enable the preparation of
financial statement to be free from material misstatement, whether due to fraud or error; and
▪ assessing the Scheme’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the Accounting
Officer anticipates that the services provided by the Scheme will not continue to be provided in the
future.
Royal Mail Statutory Pension Scheme 2021-22
27
Auditor’s responsibilities for the audit of the financial statements
My responsibility is to audit, certify and report on the financial statements in accordance with the Government
Resources and Accounts Act 2000.
My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue a certificate that includes my opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was considered capable of detecting non-compliance with laws and
regulations including fraud
I design procedures in line with my responsibilities, outlined above, to detect material misstatements in
respect of non-compliance with laws and regulations, including fraud. The extent to which my procedures are
capable of detecting non-compliance with laws and regulations, including fraud is detailed below.
Identifying and assessing potential risks related to non-compliance with laws and regulations,
including fraud
In identifying and assessing risks of material misstatement in respect of non-compliance with laws and
regulations, including fraud, we considered the following:
• the nature of the sector, control environment and operational performance including the design of the
Scheme‘s accounting policies.
• Inquiring of management, the Scheme’s head of internal audit and those charged with governance,
including obtaining and reviewing supporting documentation relating to the Scheme’s policies and
procedures relating to:
o identifying, evaluating and complying with laws and regulations and whether they were aware
of any instances of non-compliance;
o detecting and responding to the risks of fraud and whether they have knowledge of any
actual, suspected or alleged fraud; and
o the internal controls established to mitigate risks related to fraud or non-compliance with laws
and regulations including the Scheme‘s controls relating to the Scheme’s compliance with the
Postal Services Act 2011 (Transfer of Accrued Pension Rights) Order 2012, the Public
Service Pensions Act 2013, the Government Resources and Accounts Act 2000, Managing
Public Money and the regulations set by The Pensions Regulator.
• discussing among the engagement team and involving relevant internal and external specialists,
including actuarial specialists, regarding how and where fraud might occur in the financial statements
and any potential indicators of fraud.
As a result of these procedures, I considered the opportunities and incentives that may exist within the
Scheme for fraud and identified the greatest potential for fraud in the following areas: revenue recognition,
posting of unusual journals, complex transactions, bias in management estimates, the selection of
inappropriate assumptions or methodology underpinning the pensions liability and related estimates and the
payment of benefits to ineligible members. In common with all audits under ISAs (UK), I am also required to
perform specific procedures to respond to the risk of management override of controls.
I also obtained an understanding of the Scheme‘s framework of authority as well as other legal and regulatory
frameworks in which the Scheme operates, focusing on those laws and regulations that had a direct effect on
material amounts and disclosures in the financial statements or that had a fundamental effect on the
operations of the Scheme. The key laws and regulations I considered in this context included Government
Resources and Accounts Act 2000, Supply and Appropriation (Main Estimates) Act 2021, Managing Public
Money, Postal Services Act 2011 (Transfer of Accrued Pension Rights) Order 2012, Public Service Pensions
Act 2013 and the regulations set by The Pensions Regulator.
In addition, I considered the control environment in place at the Scheme, the administrator and the scheme
actuary, in respect of membership data, the pension liability, contributions due and benefits payable.
Royal Mail Statutory Pension Scheme 2021-22
28
Audit response to identified risk
As a result of performing the above, the procedures I implemented to respond to identified risks included the
following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described above as having direct effect
on the financial statements;
• enquiring of management, the Audit and Risk Committee and in-house legal counsel concerning
actual and potential litigation and claims;
• reading and reviewing minutes of meetings of those charged with governance and the Board and
internal audit reports;
• in addressing the risk of fraud through management override of controls, testing the appropriateness
of journal entries and other adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of business;
• performing substantive testing of contributions received and benefits paid in the year to ensure
compliance with laws and regulations and regularity;
• engaging an auditor’s expert to review the actuarial methods and assumptions used by the scheme
actuary, reviewing the expert’s report and undertaking any further procedures as necessary; and
• reviewing any significant correspondence with the Pensions Regulator.
I also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members including internal specialists and remained alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
A further description of my responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of my
certificate.
Other auditor’s responsibilities
I am required to obtain appropriate evidence sufficient to give reasonable assurance that the Statement of
Outturn against Parliamentary Supply properly presents the outturn against voted Parliamentary control totals
and that those totals have not been exceeded. The voted Parliamentary control totals are Departmental
Expenditure Limits (Resource and Capital), Annually Managed Expenditure (Resource and Capital), Non-
Budget (Resource) and Net Cash Requirement.
I am also required to obtain evidence sufficient to give reasonable assurance that the expenditure and income
recorded in the financial statements have been applied to the purposes intended by Parliament and the
financial transactions recorded in the financial statements conform to the authorities which govern them.
I communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that I
identify during my audit.
Report
I have no observations to make on these financial statements.
Gareth Davies
Date 14 July 2022
Comptroller and Auditor General
National Audit Office
157–197 Buckingham Palace Road
Victoria
London
SW1W 9SP
Royal Mail Statutory Pension Scheme 2021-22
29
Financial Statements
Statement of Comprehensive Net Expenditure
for the year ended 31 March 2022
2021–22
2020–21
Note
£000
£000
Principal arrangements – Royal Mail Statutory
Pension Scheme
Expenditure
Pension financing cost
3
598,631
868,982
Net expenditure
598,631
868,982
Other comprehensive net expenditure
Net actuarial loss
7.7
3,125,372
192,258
Total comprehensive net expenditure for the year
ended 31 March
3,724,003
1,061,240
The notes on pages 33 to 39 form part of these financial statements.
Royal Mail Statutory Pension Scheme 2021-22
30
Statement of Financial Position
as at 31 March 2022
31 March
31 March
2022
2021
Note
£000
£000
Principal arrangements – Royal Mail
Statutory Pension Scheme
Current assets:
Receivables
4
2,981
3,446
Cash and cash equivalents
5
18,577
21,248
Total current assets
21,558
24,694
Current liabilities:
Payables (within 12 months)
6
(67,405)
(62,596)
Total current liabilities
(67,405)
(62,596)
Net current liabilities, excluding pension
liability
(45,847)
(37,902)
Pension liability
7.4
(50,875,986)
(48,614,358)
Net liabilities, including pension liabilities
(50,921,833)
(48,652,260)
Taxpayers’ equity:
General fund
(50,921,833)
(48,652,260)
(50,921,833)
(48,652,260)
_______________________
Alex Chisholm
Principal Accounting Officer and Permanent Secretary
13 July 2022
The notes on pages 33 to 39 form part of these financial statements.
Royal Mail Statutory Pension Scheme 2021-22
31
Statement of Changes in Taxpayers’ Equity
for the year ended 31 March 2022
31 March
31 March
2022
2021
Note
£000
£000
Balance as at 1 April
(48,652,260)
(49,030,683)
Net Parliamentary funding – drawn down
1,452,149
1,439,939
Net Parliamentary funding – deemed
20,850
20,574
Supply payable – current year adjustment
6
(18,569)
(20,850)
Net expenditure for the year
(598,631)
(868,982)
Net actuarial loss
7.7
(3,125,372)
(192,258)
Balance as at 31 March
(50,921,833)
(48,652,260)
The notes on pages 33 to 39 form part of these financial statements.
Royal Mail Statutory Pension Scheme 2021-22
32
Statement of Cash Flows
for the year ended 31 March 2022
2021–22
2020–21
Note
£000
£000
Cash flows from operating activities
Net expenditure for the year
(598,631)
(868,982)
Adjustments for non-cash transactions – pension financing
cost
3
598,631
868,982
Decrease/(increase) in receivables
4
465
(865)
Increase in payables – pensions
6
4,809
2,473
less movements in consolidated fund and Scheme Manager
payables
7.5
2,671
(412)
Use of provisions – pensions to retired employees and
dependants
7.5
(1,182,418)
(1,174,055)
Use of provisions – commutations and lump-sum payments
7.5
(259,287)
(247,235)
Use of provisions – death benefits payable
7.5
(17,449)
(15,198)
Use of provisions – refunds and transfers
7.6
(3,221)
(4,371)
Net cash outflow from operating activities
(1,454,430)
(1,439,663)
Cash flows from financing activities
From the consolidated fund (supply)
1,452,149
1,439,939
Net Parliamentary financing
1,452,149
1,439,939
Adjustments for payments and receipts not related to supply
-
-
Net financing
1,452,149
1,439,939
Net (decrease)/increase in cash and cash equivalents in
the year before adjustment for receipts and payments to
the consolidated fund
(2,281)
276
(Decrease)/increase of monies that are payable to the
Scheme Manager as they are outside the scope of the
Scheme’s activities
(390)
136
Net (decrease)/increase in cash and cash equivalents in
the year after adjustment for receipts and payments to
the consolidated fund
(2,671)
412
Cash and cash equivalents at 1 April
5
21,248
20,836
Cash and cash equivalents at 31 March
5
18,577
21,248
Net (decrease)/increase in cash and cash equivalents
(2,671)
412
The notes on pages 33 to 39 form part of these financial statements.
Royal Mail Statutory Pension Scheme 2021-22
33
Notes to the Scheme financial statements
1.1 Basis of preparation of the Scheme financial statements
The financial statements of the Scheme have been prepared in accordance with the relevant provisions of the
2021–22 ‘Government Financial Reporting Manual (FReM)’ issued by HM Treasury. The accounting policies
contained in the ‘FReM’ apply International Financial Reporting Standards as adapted or interpreted for the
public sector. ‘IAS 19 Employee Benefits’ and ‘IAS 26 Accounting and Reporting by Retirement Benefit Plans’
are of particular relevance to these statements.
These financial statements set out the RMSPS’s transactions and balances relating to scheme members, all
of whom transferred into the Scheme as at 1 April 2012. As this is a closed scheme, there are no employer or
employee contributions; the ongoing pension and other payments are funded from the consolidated fund. The
administrative expenses associated with the operation of the Scheme are borne by the Cabinet Office and
reported in the Cabinet Office departmental accounts.
The Statement of Comprehensive Net Expenditure shows income and expenditure during the year. The only
expenditure items are the actuary’s estimates of the interest on the Scheme’s ongoing liabilities and actuarial
loss for the year. The Statement of Financial Position includes the actuary’s estimate of the unfunded future
pension costs of scheme members. These financial statements should be read in conjunction with the actuary’s
report.
1.2 Going concern
The Statement of Financial Position as at 31 March 2022 shows a pension liability of £50.9 billion (2020-21:
£48.6 billion) reflecting liabilities falling due in the long-term, which are to be financed by drawings from the
consolidated fund. Such drawings will be grants of supply approved annually by Parliament to meet the
Scheme’s pension benefits, which come into payment each year. Under the Government Resources and
Accounts Act 2000, no money may be drawn from the Fund other than as required for the service of the specified
year or retained in excess of that need. In common with other public service pension schemes, the future
financing of the Scheme’s liabilities is to be met by future grants of supply to be approved annually by
Parliament. Such approval for amounts required for 2022-23 has already been given. It has accordingly been
considered appropriate to adopt a going concern basis for the preparation of these financial statements.
2 Statement of accounting policies
The accounting policies contained in the ‘FReM’ follow International Financial Reporting Standards to the
extent that they are meaningful and appropriate in the public sector context.
Where the ‘FReM’ permits a choice of accounting policy, the accounting policy which has been judged to be
most appropriate to the particular circumstances of the Scheme for the purpose of giving a true and fair view
has been selected. The accounting policies adopted have been applied consistently in dealing with items
considered material in relation to the Scheme’s financial statements. Where transactions are accounted for on
a cash basis, this is specifically stated in the notes below.
An assessment of International Financial Reporting Standards (IFRS) issued but not yet effective considered
‘IFRS 16 Leases’ and ‘IFRS 17 Insurance Contracts’ and determined they are not applicable, as the Scheme
has not entered into any such arrangements.
2.1 Accounting convention
2.1.1 These financial statements have been prepared under the historical cost convention and the accruals
basis.
2.2 Transfers out
2.2.1 Transfers out represent capital sums paid to other pension schemes for members who have left the
Scheme. Transfers out are normally accounted for on a cash basis as use of provision, whereby
payments in relation to transfers out decrease the total scheme liability.
Royal Mail Statutory Pension Scheme 2021-22
34
2.3 Pension financing cost
2.3.1 The interest cost is the increase during the year in the present value of the Scheme’s liabilities
because the benefits are one year closer to settlement and is recognised in the Statement of
Comprehensive Net Expenditure. The interest cost is based on the discount rate (including inflation)
at the start of the year, i.e. 1.25% for 2021–22 (1.80% for 2020–21).
2.4 Scheme liability
2.4.1 Provision is made for liabilities to pay pensions and other benefits in the future. The Scheme liability is
measured on an actuarial basis using the projected unit method and the assumptions set out in Note
7.1 below. The assumptions for the discount rate and pension increases are specified by HM
Treasury in the PES (2021) 10, dated 13 December 2021, and remain unchanged for these accounts.
2.4.2 Full actuarial assessments by a professionally qualified actuary are obtained at intervals not
exceeding four years. The actuary reviews the most recent full actuarial assessment at the Statement
of Financial Position date and updates it to reflect current conditions and significant recent
developments. The most recent full actuarial valuation was as at 31 March 2018.
2.5 Pension benefits payable
2.5.1 Pension benefits payable are accounted for on an accruals basis as a decrease in the Scheme
pension liabilities. These include pensions, lump sums and death payments.
2.6 Actuarial gains and losses
2.6.1 Actuarial gains or losses arising are recognised in the Statement of Comprehensive Net Expenditure.
2.7 Credit losses
2.7.1 In accordance with ‘IFRS 9 Financial Instruments’, any expected credit losses are not considered to
be material to the Scheme.
2.8 Additional voluntary contributions
2.8.1 There are no additional voluntary contributions (AVCs) directly within the Scheme. AVC funds were
not transferred into the RMSPS as part of the transfer of liabilities from the RMPP to the RMSPS. Any
AVC contracts entered into with third party financial institutions in respect of AVCs are managed by
the RMPP. However, when the Scheme is obliged to do so, it pays certain benefits arising from the
disinvestment of AVCs to the relevant members. The Scheme then recovers all payments, in respect
of any AVC benefit payments, from the RMPP. Where AVCs are still to be recovered at the year end,
this is included as a receivable balance.
Royal Mail Statutory Pension Scheme 2021-22
35
2.9 Critical accounting judgements and key sources of estimation uncertainty
2.9.1 In accordance with IAS 1 – ‘Presentation of Financial Statements’ – the preparation of these accounts
requires management to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenditure. These assessments
are based on historic and other factors that are believed to be reasonable, the results of which form
the basis for making judgements. The estimates and underlying assumptions are reviewed on an
ongoing basis. There have been no changes made to past assumptions. The key estimates and
judgements relate to the valuation of the pensions liability set out in Note 7 below.
3 Pension financing cost (see also Note 7)
2021–22
2020–21
£000
£000
Net interest on defined benefit liabilities
598,631
868,982
598,631
868,982
4 Receivables
2021–22
2020–21
£000
£000
Amounts falling due within one year:
RMPP
1,354
1,769
Repayment from pensioners
1,625
1,625
Cabinet Office
1
51
Administrator
1
1
Balance at 31 March
2,981
3,446
5 Cash and cash equivalents
2021–22
2020–21
£000
£000
Balance at 1 April
21,248
20,836
Net change in cash balances
(2,671)
412
Balance at 31 March
18,577
21,248
The following balances at 31 March were held at:
Government Banking Service (GBS)
18,485
21,224
Commercial banks and cash in hand
92
24
Balance at 31 March
18,577
21,248
Royal Mail Statutory Pension Scheme 2021-22
36
6 Payables – in respect of pensions
2021–22
2020–21
£000
£000
Amounts falling due within one year:
Pensions payable
(17,956)
(19,118)
Lump sums payable
(19,197)
(9,896)
Tax deductions payable
(11,675)
(12,334)
Amounts issued from the consolidated fund for
supply but not spent at year end
(18,569)
(20,850)
Amounts payable to the Cabinet Office
(8)
(398)
Balance at 31 March
(67,405)
(62,596)
7 Provision for pension liabilities
7.1 Assumptions underlying the pension liability
The RMSPS is a closed, defined benefit scheme and is wholly unfunded. Pension liabilities are accrued up to
31 March 2012, as explained in more detail in the Report of the Manager. The calculation of the pension
liability is based on a full actuarial assessment of the Scheme carried out as at 31 March 2018, updated
annually by the Government Actuary’s Department to reflect changes that have occurred from 1 April 2018 to
31 March 2022. The Report of the Actuary in these financial statements sets out the scope, methodology and
results of the work the actuary has carried out.
The Scheme Manager, together with the actuary and the auditor, have drafted a Memorandum of
Understanding that identifies, as far as practicable, the range of information that the Scheme Manager should
make available to the actuary in order to meet the expected requirements of the Scheme auditor. This
information includes, but is not limited to, details of:
• scheme membership, including age profiles, active and deferred members and pensioners;
• benefit structure, including details of any discretionary benefits and any proposals to amend the
Scheme;
• income and expenditure; and
• following consultation with the actuary, the key assumptions that should be used to value the
Scheme’s liabilities, other than those financial assumptions prescribed by HM Treasury, ensuring that
the assumptions are mutually compatible and reflect a best estimate of future experience.
The major assumptions used by the actuary, including mortality assumptions, are described in the
Report of the Actuary; the primary financial assumptions are set out below. Since the Scheme is closed
to future accrual, there are no assumptions about potential pay increases.
At 31 March 2022
At 31 March 2021
%
%
Nominal rate of return (discount rate)
1.55
1.25
Nominal pension increases (CPI)
2.90
2.22
Rate of RPI inflation until February 2030
3.90
3.22
Rate of RPI inflation from February 2030
3.00
2.32
Discount rate net of inflation (CPI)
(1.30)
(0.95)
The actuary uses professional expertise in arriving at a view of the most appropriate rates to use in the annual
valuation of the Scheme liabilities. However, the Scheme Manager acknowledges that the valuation is
inherently uncertain, since a change in any one of these assumptions will either increase or reduce the
liability.
Royal Mail Statutory Pension Scheme 2021-22
37
The assumption with the biggest impact on the reported liability is the discount rate net of price inflation. As
required by ‘IAS 19’, this is based on yields on high quality corporate bonds. However, unlike ‘IAS 19’, the
yields are prescribed by HM Treasury and so not assessed at the reporting date, nor calibrated to the term of
the RMSPS liabilities. Any decrease in the discount rate net of inflation leads to a significant increase in the
reported liability.
7.2 Analysis of the pension liability
Present value of the actuarial liability
in respect of
31 March 2022
£ million
31 March 2021
£ million
Pensions in payment
21,499
21,418
Deferred members
29,377
27,196
Total liabilities
50,876
48,614
7.3 Sensitivity analysis
In accordance with ‘IAS 19’, the Scheme Manager is required to undertake a sensitivity analysis for each
significant actuarial assumption showing how the defined benefit obligation at the end of the reporting period
would have been affected by changes in the relevant actuarial assumption.
A sensitivity analysis for each significant actuarial assumption as at the end of the accounting year is detailed
below.
Sensitivity to significant assumptions
Change in assumption*
Approximate effect on total
liability
Financial assumptions
%
£000
(i) net discount rate increase of ½% a year
(9.0)
(4,578,400)
(ii) pension increases of ½% a year
9.0
4,578,400
Demographic assumptions
(ii) additional one-year increase in life expectancy at
retirement
4.5
2,289,400
*
Opposite changes in the assumptions will produce approximately equal and opposite changes in the
liability.
The assumptions for the discount rate and pension increases are specified by HM Treasury in the PES (2021)
10, dated 13 December 2021, and remain unchanged for these accounts. The PES assumptions reflect
market conditions at the previous 30 November and are typically not amended for any changes between
November and the accounting date.
Royal Mail Statutory Pension Scheme 2021-22
38
7.4 Analysis of movements in the Scheme liability
2021–22
2020–21
Note
£000
£000
Scheme liability as at 1 April
(48,614,358)
(48,993,977)
Pension financing cost
3
(598,631)
(868,982)
Benefits payable
7.5
1,459,154
1,436,488
Pension payments to and on account of
leavers
7.6
3,221
4,371
Net actuarial losses
7.7
(3,125,372)
(192,258)
Scheme liability at 31 March
(50,875,986)
(48,614,358)
7.5 Analysis of benefits paid
2021–22
2020–21
£000
£000
Pensions to retired employees and dependants (net of
recoveries or overpayments)
1,182,418
1,174,055
Commutations and lump sum benefits on retirement
259,287
247,235
Death benefits payable
17,449
15,198
Per Statement of Cash Flows
1,459,154
1,436,488
7.6 Analysis of payments to and on account of leavers
2021–22
2020–21
£000
£000
Individual transfers to other schemes
3,221
4,371
Total payments to and on account of leavers
3,221
4,371
7.7 Analysis of actuarial loss
2021–22
2020–21
£000
£000
Experience gains and losses arising on the
pension liabilities
(535,635)
903,142
Changes to assumptions
(2,589,737)
(1,095,400)
Total actuarial loss
(3,125,372)
(192,258)
Royal Mail Statutory Pension Scheme 2021-22
39
7.8 History of experience gains/(losses)
2021–22
2020–21
2019–20
2018–19
2017–18
Experience gains (and losses) on
scheme liabilities:
Amount (£000)
(535,635)
903,142
361,864
(1,378,262)
(202,658)
Percentage of the present value of the
Scheme liabilities
1.05%
(1.86%)
(0.74%)
3.14 %
0.44%
Total amount recognised in
Statement of Changes in
Taxpayers’ Equity:
Amount (£000)
(3,125,372)
(192,258)
(4,899,946)
2,229,738
391,342
Percentage of the present value of the
Scheme liabilities
6.14%
0.40%
10.00%
(5.07%)
(0.84%)
8 Financial instruments
The Scheme’s financial instruments comprise cash, receivables and payables. Details of these can be found
in the relevant notes.
Resources, voted annually by Parliament, finance the Scheme’s net revenue resource requirements; there is,
therefore, no exposure to significant liquidity risks. The Scheme does not access funds from commercial
sources and so is not exposed to interest rate risk.
The Scheme has no significant exposure to foreign exchange rate risk. The foreign exchange rate risk falls on
the recipient of the payment made by the Scheme. Any increase or decrease in the amounts receivable, in
respect of overseas payments liable to foreign exchange rate risk, is borne by the individual member.
There is no material difference between the fair values and carrying values of the Scheme’s financial
instruments.
9 Related-party transactions
The Scheme falls within the ambit of the Cabinet Office, which is regarded as a related party with which the
Scheme has had various material transactions during the year in respect of commission income received
payable to the Cabinet Office and administration fees paid to be reimbursed to the Scheme. None of the
managers of the Scheme, key managerial staff or other related parties have undertaken any material
transactions with the Scheme during the year (2020–21: none).
The RMPP Trustee Executive has continued responsibility for the ongoing RMPP that holds pension
benefits for active deferred members. AVC Funds are retained in the RMPP and material transactions are
completed during the year in relation to these funds.
10 Events after the reporting period
There have been no material events between the Statement of Financial Position date and the date the
account was authorised for issue.
The Accounting Officer of the Scheme has authorised these financial statements to be issued on the date
that the Comptroller and Auditor General certifies the accounts.
E02756581
978-1-5286-3432-8
