My Ref: MRP 1/8/42                                                                                   


15th April 2021


Circular Num: NP/118/2021


To: The Secretary All Branches & Regional Councils


Dear Colleague,




Following the 2019 Triennial Actuarial Valuation of the Freightliner section of the RPS the results revealed a deficit of £48.8m with a funding level of 90.5%. This is a significant increase on the deficit revealed as part of the 2016 valuation results which showed a shortfall of £2.3m and a funding level of 99.4%.


We are advised that the increase in the deficit can be mainly attributed to the change in the employer’s Covenant Rating which reduced from a 2 to a 3.  This change in covenant, the assumed financial strength of the employer, has reduced the funding level by 10% after considering investment returns over the past three years. Also, and perhaps more crucially, the reduction in Covenant Rating will also reduce the projected returns on investment over the next three years i.e. the Discount Rate.


Our representatives on the Freightliner Pensions Forum have challenged the covenant rating with the employer, RPMI, and the scheme actuary but all stated that the covenant 3 was the right rating and the trustee was highly unlikely to take a different view.


It was also reported to our representatives during the consultation that The Pension Regulator (TPR) had written to Freightliner and in their considered opinion the company should have been a covenant 3 in respect of the 2016 valuation.


As you will no doubt be aware any pension scheme deficit has to be addressed and the scheme actuary has indicated that based on these results the employer’s deficit repair contributions would increase from £6.7M to £15.1M over five years. Over the same period member contributions would increase as follows:


  • Protected - 11.18% to 21.10%
  • Indefeasible - 9.94% to 19.88%
  • Non-protected - 9.86% to 19.78%

(Protected are those members who were employed by BR before privatisation and Indefeasible are those employees who left the industry but returned within 6 months and therefore maintain much of their protected status.)


For many the above increases would likely be unaffordable and clearly doing nothing was not an option or an outcome this union could accept.


Management advised us through the Freightliner Pensions Forum that they were also not prepared to increase their lump sum deficit contributions and therefore made the following proposal to address the deficit in this RPS section.

  • Closure of the Freightliner Pension Scheme to new entrants from 31st March 2021
  • CPI Pensionable Pay Cap for future accurals (service)
  • An increase to Normal Retirement Age (NRA) to 65 for future service
  • Changes to Terms and Conditions of Service such as:
  • New generation T&C’s for Train Drivers
  • New Generation T&C’s for Road Drivers
  • Increase flexibility for Terminals, such as rosters and short notice changes.
  • Capping Sick Pay at 16 weeks Full Pay & 16 weeks Half Pay

The proposal above was nothing more than unacceptable and had it been implemented would not have only affected current scheme members but also effected new employees joining the Freightliner business. Perhaps more shockingly management also proposed to attack employees Terms and Conditions (T&Cs) to recoup the shortfall in the pension scheme.


Our representatives and the rest of the trade union side on the Pensions Forum made it quite clear to management that any change to T&Cs could only be discussed through the appropriate machinery so these proposals needed to be taken off the table if future discussions were to be productive.


This pension proposal, without the attack on T&Cs, was unanimously rejected by all four trade unions and while management were keen to resolve this issue as soon as possible it was agreed to have further meetings to find an acceptable solution.


As I have indicated above the key reason why the deficit has increased is due to the Freightliner Covenant Rating being downgraded by the RPS Trustees and the only way this could be improved i.e. the rating to remain at a 2, is for management to either provide evidence that the employer is stronger than the trustees believe it to be or for the parent company to put in place a monetary guarantee to protect the pension scheme. I can advise that despite your representatives’ efforts neither of the above could be achieved so our representatives were left with a position of trying to protect members future benefits and keep contributions at an affordable level for members.


Following 10 additional meetings and a number of alternative proposals being made the following “final” proposal was made:

  • An 8 year recovery plan
  • An increase of NRA to age 65 for non-protected members (Protected members NRA remains at 60) for future service.
  • 3 year waiting period for new employees to join the RPS, with exceptions for those joining and already being active members of the RPS, and being no more than a six month gap between one railway employer to working for Freightliner, subject to not working outside of the industry during that period.
  • Any employee who already works for Freightliner, but is not a current active member of RPS will continue to have the ability to join the RPS without any restrictions.
  • New members to have an NRA of 67
  • A CPI pensionable pay cap on future service rises, applicable to annual collective pay agreements only, this would be based on the September CPI rate.
  • Member contribution Rates to increase from 1st July 2021 as follows:
  • Protected - 11.18% to 14.24%
  • Partly Protected - 9.94% to 13.32%

Non-Protected - NRA62 - 9.86% to 12.84%

  • Non-Protected  - NRA of 65 – 11.92% (future service only, applies to current active non-protected members going forward).
  • New Entrants - NRA of 67 – 11.08%
  • Subject to agreement the employer will contribute an additional £1.5M pa from 1st July 2021 to 30th June 2024


I can advise that your National Executive Committee on 13th April 2021 after comprehensive consideration have reluctantly accepted the above proposal.


This proposal is far from where our representatives or the RMT would want to be but the reality is that the above proposal is the best position which could be negotiated under the current economic climate. It is fully appreciated that the increase to contributions and the increase to the Normal Retirement Age for future service is going to be disappointing for many of our members, but the reality is that as much as these changes may be unpalatable, our members will still able to build up decent final salary pension benefits prior to retirement.


One other important element of this proposal is that this section of the RPS remains open to new entrants because without new members going into the section any future deficit, due to the shared cost nature of the RPS, would have to be shared amongst a much smaller population of contributing members as people retire or leave the business. This is crucial from what we have experienced from other section of the RPS who now have much higher contributions and, in some cases, lower benefits.


I will keep you updated on future developments.


Yours sincerely


Mick Cash                                                      

General Secretary