TPR has asked the RPS administrators to review the assumptions used to calculate part of its 2016 and 2019 valuations, after finding that the plan administrators had overestimated the financial security of companies holding former rail operating franchises. No reviews have been signed.
The intervention, which was carried out in 2017, concerns the sections of the plan covering the railway operating companies, known as “TOC sections”.
TPR wants the RPS trustee to adopt a more conservative investment philosophy and downgrade its covenant rating. The RMT is discussing alternative measures with TOC employers.
This would move most sections from fully funded to deficit
“An Attack on the Members”
In November 2017, the RMT informed members that it had become aware of TPR’s interest in the assumptions used for the evaluation of the TOC sections.
Subsequent regulator intervention meant that the 2016 assessment for the 27 TOC sections could not be approved before its statutory deadline of 31 March 2018. The joint contribution rates in the Abellio Scotrail section remained unchanged beyond July 1, 2018, when they were supposed to increase. .
The RMT has acknowledged members’ concerns over their pension benefits in 2019 following the disqualification of Stagecoach from bidding on three rail franchise contracts.
“A senior [Department for Transport] official has verbally informed Stagecoach that it has been disqualified from all three competitions for submitting non-compliant bids primarily with respect to pension risk,” the company announced in April 2019.
According to Stagecoach chief executive Martin Griffiths, without continued government support for railway pension funding, TPR had indicated an additional £5-6 billion would be needed to close the gap in pensions. railway company pensions.
“In contrast, the rail industry’s proposed solution would have provided an additional £500-600 million to the scheme. It would have provided better stability and security for members and much better value for taxpayers,” he said at the time.
“The regulator’s intervention undoubtedly caused Stagecoach to submit a non-compliant offer,” Mick Cash, then RMT’s general secretary, wrote in a circular to members in May 2019.
“The RMT has received joint correspondence from the Work and Pensions and Transport Select Committees at the DfT regarding the banning of Stagecoach from bidding for future rail franchises because they have refused to honor any future pension shortfalls”, he confirmed.
The RMT national executive committee has denounced the government’s decision to help TOC employers deal with pension shortfalls while members were still forced to pay the cost of their share.
“It is clear that TPR’s intervention and the DfT’s proposal to share any risk of deficit with TOC employers is not only an attack on our members’ future pension rights, but also casts doubt on the future term of RPS,” he told the conference. time.
He then threatened “a campaign of coordinated trade union action across the rail industry to defend pensions”.
Proposed alternative measures
According to the September 2022 RMT circular to members, TPR believes that the results of the RPS assessment are incorrect and that the level of funding for each TOC section should be at least 25% lower than the trustees’ estimate.
“It would take most sections from full funding to deficit,” warned members of general secretary Mick Lynch.
The union has been told that to meet the regulator’s expectations, the change in investment strategy could increase the average joint contribution rate by 15 per cent, from 19 per cent to around 34 per cent of branch pay.
On average, members could see their dues increase by up to 7.6%, adding that this increase would lead to members leaving the scheme, Lynch warned.
The RMT and sister unions received a presentation from the Chair of the Informal Pension Steering Group, through which they met with TOC employers, outlining a series of alternative proposals to secure approval of both assessments and to protect members against dues increases.
It has been proposed that the normal retirement age be raised from 62 to 65 for future service from 1 February 2023 for all “unprotected members”.
An unprotected member is someone who was not a member of the RPS – formerly the BR Pension Scheme – before the privatization of the railways. Members of the BR Pension Scheme on 4 November 1993 are considered “protected” and have the statutory right to remain a member of the RPS with the same level of benefits.
A “ceiling of pensionable earnings for past service” aligned to the Consumer Price Index per year would be imposed on all members, with any increase above the ceiling only eligible for a pension for service future.
There would also be a two-year waiting period for new entrants who are not members of the RPS. New hires would join the industry-wide defined contribution section for the duration of the waiting period.
Finally, for the majority of TOC members and sections, membership and employer dues increases would be made on a staggered annual basis over consecutive years, limited to one per year for members. This would be for a maximum of four years and 4% from July 2023.
TPR finds contribution errors in auto-registration inspections
Auto-enrollment inspections by the pension regulator found a “number of errors” in complying with auto-enrollment, including miscalculation of pension contributions and poor communication with staff.
For some sections, no increase would be necessary. The RMT National Executive Committee is currently reviewing the proposals.
A TPR spokesperson said: “We are working closely with the scheme trustee, Rail Delivery Group and the DfT to ensure the best possible outcome for pension scheme savers. This work aims to ensure that the scheme is adequately funded and sustainable over the long term.
“We want all occupational pension plans, including defined benefit plans, to recognize the risks to their plan and then manage, address and mitigate them appropriately to protect their members.”