Explanatory note

This Order implements sections 21 and 22 of the Postal Services Act 2011 (c. 5) (“the Act”). It transfers assets from the Royal Mail Pension Plan (“RMPP”) to a Fund established by the Secretary of State for Business, Innovation and Skills (the Business Innovation and Skills Fund Limited, “the Fund”) and prescribes how the assets and liabilities of the RMPP must be valued for the purposes of the transfer. This Order will come into force at the same time as the Postal Services Act 2011 (Transfer of Accrued Pension Rights) Order 2012 (SI No. 2012/687) (“the Benefits Order”), which transfers all the historic liabilities of the RMPP to a new public scheme.

Article 1 provides for the operative provisions of this Order to come into force by way of a separate Order.

Articles 2 and 3 prescribe the Government Actuary as the person to perform the calculations necessary for determining the value of assets to transfer, and state when those calculations must be performed.

Articles 4 to 9 establish the requirements for the transfer of assets from the RMPP to the Fund that are detailed in the rest of the Order.

Article 4 requires the Trustee to make the transfer. Article 5 provides that the transfer must be made up of two transfers, an interim transfer (article 5) and a final transfer (article 6). Both transfers are an obligation on the Trustee to transfer assets, equal to an amount calculated by the Government Actuary in accordance with the calculations in Schedule 1. The interim transfer is to be made upon the coming into force of this Order, subject to the provisions in Schedule 5 about when each asset can actually transfer. The final transfer must occur 5 business days after the day on which the Government Actuary is able to verify that the calculations for the total amount to transfer are complete.

Article 7 provides that the transfers must be made to a company established by the Secretary of State for this purpose, referred to as the Fund, or to its subsidiary, the Fund subsidiary, to which specific assets must transfer instead of the Fund.

Article 8 applies Schedule 5 to the transfers, which provides further detail about when and how the Trustees must effect the transfer of each asset, and deals with assets which in certain situations do not transfer.

Article 9 applies Schedule 6 to the transfers, which contains requirements about the assets making up the transfers. It specifies, to the extent required, the assets which are to be retained by the RMPP, assets which are to be invested by the Trustee immediately which will the constitute the final transfer, and the composition of the final transfer if the amount of assets required to be transferred is more or less than those invested for that purpose.

Schedule 1 prescribes the valuation methodology to determine the amount of assets to be transferred in each transfer. Along with schedules 2, 3 and 4, it provides the methodology and assumptions for the Government Actuary to value the assets and liabilities of the RMPP, and determine the amount to transfer in order to leave the RMPP fully funded to meet its liabilities after the transfer. Paragraph 10 in particular ensures that the RMPP will be fully funded as at 31 March 2012 after the transfers, and that the test at section 22 of the Act requiring the funding level of the RMPP to be at least as good after the transfers as before, is met.

Schedule 2 prescribes the financial assumptions to be used in determining the liabilities of the RMPP. Schedule 3 prescribes the demographic assumptions to be used in determining those liabilities. Schedule 4 prescribes the principles to be applied in valuing the assets of the RMPP, and sets out the date as at which assets are to be valued. This date is different for those assets which are considered to be private equity.

Schedules 5 and 6 are dealt with above.

An Explanatory Memorandum accompanying this Order is available alongside the instrument on the OPSI website (www.opsi.gov.uk). Copies have also been placed in the Libraries of the House of Commons and the House of Lords.

An impact assessment has not been produced for this Order as a full impact assessment was prepared for the enabling provisions in the Act, the findings of which have not changed.