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November 4, 2010
Circular No. NP 195/10
Dear Colleague,
Proposed Pensions Changes - Bombardier Transportation Ltd
I have received a letter from Bombardier Transportation Ltd providing details of proposed changes to the pension arrangements offered to their employees through the BTUK Pension Plan and the BTUK 2003 Pension Scheme. The company has tabled the proposals to the Trustees and are consulting with members of the funds.
The company proposes;
The indexation cap will apply to pension benefits built up in respect of pensionable service on and after 1 March 2011. In future, increases will continue to be determined with reference to changes in prices, however if the maximum increase will be 2.5% per annum. Management state that capping pension increases brings the BTUK Pension Plan in line with the increases which many other occupational pension schemes are currently providing. However, such a cap does not apply to all schemes and is aimed at reducing employer costs.
The proposed introduction a Money Purchase Scheme is in recognition that some employees may find the higher pension costs unaffordable. This will provide a choice to elect to opt out of membership of the BTUK pension. Contributions to the new Scheme would be a minimum employee rate of 4% of basic salary and a minimum employer contribution rate of 6% of basic salary. In addition, if the employee elects to pay any contributions above to the 4% minimum then the Company will match these, up to a maximum employer contribution of 12%.
However, members will be very much aware that the level of pension derived from Money Purchase schemes is not based on an individual’s rate of pay and not known until actual retirement by which time it is too late to take remedial action. In addition, the Bombardier Stakeholder Scheme will be "contracted-in" to the State Second Pension. This means that unlike contributors to the Plan and 2003 Scheme, members and the Company will pay full rate National Insurance but in return they will earn an entitlement to the State Second Pension. Thus overall costs are likely to be as high but the level of benefits lower. The Stakeholder Scheme also has a death in service life assurance benefit of 2 times basic salary, but this is half the amount payable from other funds and has no spouse provision.
For current active members of the BTUK Pension Plan there is also an additional option to move from the old section to the new section. The new section has a lower employee contribution with reduced benefits than those provided within the old section.
Management has commenced a consultation exercise and RMT members should therefore have received a letter on the matter. The consultation period will run for 60 days and commence with effect from 12 October and ends on 10 December 2010.
These proposals are effectively a significant attack by Bombardier management on the pensions offered to their employees. They increase members’ pension costs while at the same time reducing benefits. Accordingly on 3rd October, I wrote to management seeking a meeting; however, despite a subsequent reminder on 23rd October, no response has been received.
A joint Trade Union meeting was held yesterday with our colleagues from TSSA and Unite where it was agreed all three Unions would respond to management objecting to the proposals and request an urgent meeting on the matter.
In the meantime, I would urge members to respond to Management’s consultation letter rejecting the proposals and requesting that the matter should be discussed with the RMT. A specimen letter of rejection is attached hereto for assistance.
I shall keep you advised of developments.
Yours sincerely,
Bob Crow,
General Secretary
