My Ref: MRP 1/8/43
11th October 2013
Circular Num: NP/ 278/13
To: The Secretary All Branches & Regional Councils
FREIGHTLINER AUTO ENROLMENT PROPOSALS
In line with Pensions Act 2008 Freightliner have been given a staging date of 1st September 2013 when they are obligated to Auto Enrol those employees who are not already saving for their retirement into a qualifying pension scheme. Management have indicated that they are to defer auto enrolment to 1st December 2013.
Management have stated that there are in the region of 350 staff out of approximately 1,900 who presently do not save for their retirement and therefore will have to be auto enrolled.
The Freightliner Group currently operate two pension arrangements, the Freightliner (Defined Benefit) Pension Scheme section of Railways Pension Scheme (RPS), and the Bespoke (Defined Contribution) Scheme managed by Standard Life.
While the Freightliner section of the RPS is still open to new members management are proposing to auto enrol eligible job holders into an Industry Wide Defined Contribution scheme (IWDC) which is administered by RPMI. It is also proposed that as a result of the low employee take up in the Standard Life scheme, management are intending to close this fund and transfer the existing members into the above IWDC scheme.
While the RMT support the general principle of Auto Enrolling employees into decent pension schemes, this union does not support employers offering employees inferior Defined Contribution (DC) pension arrangements in place of Defined Benefit (DB) schemes.
The basic differences of the Freightliner DB scheme and the IWDC schemes are:
• the level of pension in the DB scheme is based on a member’s service and salary in the final year of their membership in the scheme, known as final salary
• the level of pension in an IWDC scheme is dependent on the amount of contributions made into an individual’s ‘pension pot’ and how well the money is invested. The level of pension at retirement is also reliant on the annuity rates being offered at the time of the member retiring. Annuity rates can go up or down
• the Freightliner DB scheme offers members a promise that at retirement they will receive a certain level of pension at retirement
• the IWDC schemes offers no such promise, and while a pension will be payable at retirement it is difficult to exactly calculate what pension will be payable at retirement as a result of the volatility of investments and fluctuating annuity rates
Based on the above it is almost certain that the level of benefits being offered by the Freightliner DB Pension Scheme will be far greater than the IWDC arrangement. It is fair to say that DC pension schemes are not comparable in regards to the security and level of pension a worker will receive from being a member of the Freightliner DB Pension Scheme. As stated above one offers a promise (DB) and one does not (DC).
Despite the RMT meeting and writing to management demanding that they use the Freightliner section of the RPS as their Auto Enrolment vehicle, this request has been declined.
While employees will be able to switch to the RPS once they have been auto enrolled the RMT believe that this position being taken by the company is unsatisfactory and could result in many Freightliner employees missing out on joining RPS.
In line with the General Grades Committee decision of 8th October 2013 the RMT have written to all our members at Freightliner outlining the differences of the two pension schemes being offered to them and why it is important that they make the correct choice. We have also included a pro-forma for members to complete and hand to management requesting to join the RPS.
At the end of the day the decision to join the RPS is in the hands of the individual member not this union.
While the RMT is unable to give financial advice it is important that members understand that they need to make the right decision, knowing as many facts as possible, before deciding which pension scheme to join.
My Ref: MRP 1/8/43