London Midland Section of the Railways Pension Scheme – 2013 Actuarial Valuation
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My Ref: MRP 1/8/27 23rd January 2015
Circular Num: NP/011/15
To: The Secretary All Branches & Regional Councils
London Midland Section of the Railways Pension Scheme –
2013 Actuarial Valuation
Following the 2013 triennial actuarial valuation of the London Midland shared cost section of the Railways Pension Scheme the results reveal, allowing for future contributions, a deficit of £18.6 million with a funding level of 94.7%.
The actuary has advised that to address the shortfall in the fund, based on a 15 year recovery plan, contribution would need to increase as follows:
• Member 10.16% to 11.84% ( +1.68%) / Employer 15.24% to 17.76% (+2.52)
Management indicated that such an increase was unaffordable for the employer to absorb and were seeking to increase the retirement age in the scheme to age 63 to mitigate the shortfall.
The trade union side informed management that while they were concerned that the increase in contributions could be unaffordable for members they were not prepared to consider an increase in the retirement age.
After a number of joint trade union meetings with management the following proposal was made:
• 15 year recovery plan
• 5 year pensionable pay cap of RPI (to be reviewed at the 2016 valuation)
• Introduction of Cost Neutral Early Retirement Factors (CNERF) to age 60 for non-protected members
• Non Protected Members Contribution Rate with CNERF / 10.16% to 10.33% (+0.17%) / Employer 15.24% to 15.50% (+0.26%)
• Protected Members who retain Schedule 8 Early Retirement Factors Contribution Rate / 10.16% to 10.89% (+0.73%) / Employer 15.24% to 16.34% (+ 1.10%)
• Protected Members have the option to switch to CNERF and pay contributions of 10.33%
Please note that as a result of a reduction in the Pension Protection Fund levy for London Midland the liabilities in the find were reduced by £2 million. Management have also proposed to allow Independent Financial Advisors “Origen” to attend employee pension briefings in regards to the above proposals.
The General Grades Committee in consideration of this proposal on 22nd January 2015 noted and adopted the following report:
“We note that the 2013 valuation results for the London Midland section of the Railways Pension Scheme, indicates a deficit of £18.6 million and without corrective action member contribution would increase from 10.16% to 11.84%.
To mitigate the shortfall in the fund management are proposing as part of their plan a 5 years cap of RPI on future pensionable pay increases.
While we note the recommendation of acceptance of these proposals by our representatives at London Midland and Regional Organiser we would add that caps on pensionable pay and other possible proposals are agreed on the merits of each particular case and should not be seen as a “green light” by employers.
However, without some form of corrective action member contributions would have increased by 1.68% which could have resulted in the scheme becoming unaffordable for many.
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.