My Ref: MRP 4/8
23rd December 2013
Circular Num: NP/ 368 /13
To: The Secretary All Branches & Regional Councils
Go Ahead (Bus) Group Pension Plan – Ceasing of Future Accrual
Following the 2012 Triennial Actuarial Valuation of the Go Ahead Group Pension Plan the results revealed an increase in the funds deficit from £49.1 million in 2009 to £82.6 million in 2012.
The total liabilities in the plan have increased from £351.2 million in 2009 to £603.1 million in 2012. This can be contributed to the asset and liability merger of the Southern Vectis and Wilts & Dorset and East Thames Pension Schemes between valuations.
The employer has stated that since the 2009 valuations Go Ahead have contributed £14 million pounds per annum into the plans, which £9 million can be contributed to deficit correction payments. It is anticipated that total employer contributions will be in the region of £19 million per annum as a result of the 2012 valuation results.
As a result of the deficit and contribution increases the employer proposed in May 2013 to close all sections of the Defined Benefit (DB) plan for future accrual from 1st October 2013. This would affect approximately 1,300 contributing members, 10% of the workforce. Please note that all sections of the plan have been closed to new entrants since the mid 2000s.
Management originally proposed the following to compensate members of the plan:
• Active members will be offered access to the company’s Defined Contribution (DC) pension scheme, Enhanced Money Purchase.
• Enhanced Money Purchase Contributions rates:
o Members 4%
o Employer 6.5% with an extra 2.5% for pensionable salary above £40,040 (Upper Earning Limit)
• Death in service will be 4 x Gross Earnings
• Defined Benefit Ill Health benefits to remain as stated in the rules of the plans as if those affected employees are active members
• Defined Benefit Early Retirement reduction factors to remain as stated in the rules of the plans as if those affected employees are active members
• Members pensionable pay would remain at 30th September 2013 rate and would increase each year to a maximum of 5% CPI
Resulting from this announcement the RMT corresponded with other trade union that have members in this pension scheme proposing that a campaign is started to keep the plan open for future accrual. Regrettably the responses received from the majority unions was that they would be focusing their attention on improving the DC pension scheme proposal and therefore would not be challenging this decision industrially.
Despite the position of the other unions the RMT made a number of alternative proposals to management to keep the plan open. While the RMT proposals would see future member accrual reduced, the DB plan would still offer far superior benefits than the DC proposals being made by management. They would also reduce the employer’s exposure to risk and reduce their pension costs.
Despite the RMT’s constructive proposals management rejected them stating that they did not meet with the aspirations of the Go Ahead Group i.e. zero risk.
After consultation with RMT representatives at Go Ahead it was agreed to make further proposals in relation to improving the DC scheme. These proposals included increasing the employer contribution rate and keeping the plan open until April 2014.
After a number of meetings between RMT representative and management the following improved proposals were made:
• The Go Ahead Group Plan to remain open until 31st March 2014
• Enhanced Money Purchase contribution rates: Member 4% Company 7%
Member 6% Company 9%
• Compensation payment of 2% of pensionable salary or a £500, whatever is the greater, to paid into members pensions accounts or as a cash payment
The following the decision was made by the General Grades Committee on 12th December 2013:
“The representatives and the Regional Organiser has tried their best to defend this final salary pension scheme we have achieved some moderate concessions, but we note we cannot get any more concessions at the moment and therefore we note the position.”
I will keep you informed of any developments.
My Ref: MRP 4/8