The government will allow Royal Mail to borrow £900m on commercial terms to invest in modernisation of the business.
It will also intervene in Royal Mail's pensions difficulties by permitting it to transfer £850m of reserves to a pension escrow account that the pension fund trustees could draw on "in the unlikely event that Royal Mail should fail as a business".
The pension fund is now in deficit by £5.6bn, compared with £4.4bn a year ago.
Alistair Darling, the trade and industry secretary, said the help would put Royal Mail in a stronger position.
Darling said: "This financing framework will give Royal Mail the right basis from which to take forward an ambitious modernisation programme, helping to deliver a world-class service."
There was no news on Royal Mail chairman Allan Leighton's proposal to issue shares in the company to workers. On this issue, it is believed that the company remains in talks with the government.
Royal Mail yesterday announced its annual financial results, revealing that its 180,000 workers will get a bonus of £418, a total payout of nearly £100m.
Operating profit at Royal Mail was £355m on a record turnover of £9.06bn. Royal Mail's letters business made a £344m operating profit, £1m more than the previous year.
The company continues to lose money on stamped letters and said inland letters volume had dropped, "exacerbated by some bulk mail customers switching to lower-priced services, primarily under access arrangement with rivals".
The other divisions within the group all improved their financial performance. The Post Office made a £111m operating loss, £12m less than last year's loss. Parcelforce Worldwide made a £5m operating profit, its first full-year operating profit. European parcels business GLS grew operating profit by 37% to £100m.
Leighton said: "The results show that Royal Mail has consolidated the gains it made during its three-year renewal plan when the business returned to profit and began to hit service targets instead of routinely failing them."
Earlier this week, the company revealed its best quarterly quality of service figures for First Class letters, at 94.1% compared with its 93% target.
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