Amey Rail Section of the Railways Pension Scheme – 2013 Actuarial Valuation

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My Ref: MRP 1/8/32                                            12th December 2014
 
                                            Circular Num: NP/267 /14
To: The Secretary All Branches & Regional Councils

Dear Colleagues,

Amey Rail Section of the Railways Pension Scheme – 2013 Actuarial Valuation

Following the 2013 triennial actuarial valuation of the Amey Rail shared cost section of the Railways Pension Scheme (RPS) the draft valuation results reveal a deficit of £23.7 million with a funding level of 88.3%.

To mitigate this shortfall the actuary has indicated that the Joint Contribution Rate would need to increase as follows:

•    Member 12.04% to 19.32% (+ 7.28%) / Employer 18.06% to 29.04% (10.98%)

•    The employer also makes annual deficit correction lump payments into the fund. From 2013 these payments have been £2 million per annum

As a result of these significant increases RMT representatives have been meeting with management to find a proposal which keeps the fund affordable for members and protects future benefits.

Initially management proposed the following possible two options:

•    Option One:

•    CPI pensionable pay cap to a maximum of 2.4% until 2016

Member contributions to reduce from 12.04% to 12.00% (-0.04%) and reviewed at the 2016 valuation

•    Options Two:

•    Pensionable pay cap of maximum of 2% until 2019

•    Member contributions to reduce from 12.04% to 12.00% (-0.04%) and reviewed at the 2019 valuation

•    Deficit correction payments to be funded by the employer until 2019

•    Employer FSJCR to increase from 18.06% to 20.40% (+2.34%)

•    Employer to continue to make deficit correction payments of £2 million per annum until 2021

•    Close the scheme to non-protected members for future accrual

•    Begin discussions in relation to the ending of contracting out and recouping the employers National Insurance rebate

While a cap on future pensionable pay increases of 2% or 2.4% was far from satisfactory, the concern of our representatives was that unless something was done to protect members from further contribution increases or benefit change the same funding problems could be faced again at the next valuation in 2016.

Our representatives were therefore looking for some form of stability at least for the immediate future.

After a number of meetings with management our representatives were able to improve on Option Two (above) with the following proposal.  

•    Pensionable pay cap of RPI to a maximum of 2.25% until 2019

•    Member contributions to reduce from 12.04% to 12.00% (-0.04%) and reviewed at the 2019 valuation

•    Deficit correction payments to be funded by the employer until 2019

•    Employer FSJCR to increase from 18.06% to 20.40% (+2.34%)

•    Employer to continue to make deficit correction lump sum payments of £2 million per annum until 2021

•    The scheme to remain open for non-protected persons to accrual future service benefits

•    The company agree to absorb their National Insurance rebate and not pass it on to members. This is a permanent proposal

The General Grades Committee in consideration of this proposal noted and adopted the following report on 4th December 2014:

“We note the proposals on file and further note that our representatives are recommending acceptance of the proposals.   

Therefore we instruct the General Secretary to inform the company of our acceptance.

Branches and Regional Councils to be informed.”

I will keep you informed of any developments.

Yours sincerely,

 

Mick Cash
General Secretary