9th April 2021
Circular Num: NP/114/21
To: The Secretary All Branches & Regional Councils
Dear Colleagues,
HULL TRAINS SECTION OF THE RAILWAYS PENSION SCHEME 2019 ACTUARIAL VALUATION PROPOSALS
Further to Circular NP/099/21, 30th March 2021, I can advise you that following two avoidance of dispute meetings with management I must inform you that they have made it clear that they intend to close the Hull Trains section of the RPS to future accrual (pensionable service) from 25th April 2021. This is despite the RMT offering to continue discussions to avoid a dispute if management agreed to extend the consultation period. I therefore have to advice having consulted with our representatives at Hull Trains that we intend to ballot our members for industrial action in defence of their future pension rights.
I know for many of our members at Hull Trains taking strike action may seem, under the current economic climate, a drastic measure but our representatives and your National Executive Committee feel that we are left with no other option. If we allow the employer to close this well-funded pension scheme this will result in our members being a lot poorer in retirement. This is totally unacceptable and a position which we cannot except so we believe that our members should be given the chance to have their say.
As I have already stated in previous correspondence the Hull Trains pension scheme is well funded and indeed unlike many similar pension schemes in the UK has a surplus of £100k, when taking into account future contributions. This is a fact.
Management have stated that there is a £15m deficit which will need to be picked up by the employer over the next few years. This is not a fact.
To make the scheme self-sufficient on a solvency basis it is true that the scheme would need an additional £15m but neither the RPS trustees or the Pensions Regulator are insisting that Hull Trains picks up this bill. The reality is that management are trying to use this poorly constructed argument to transfer their pension risk to their employees by offering them an inferior Defined Contribution (DC) pension arrangement, and as a result make them poorer in retirement. This is nothing more than an opportunist attack during a time of crisis on our members deferred pay.
So that there is a better understanding of the differences between the current Hull Trains Pension Scheme and the Industry Wide Defined Contribution (IWDC) scheme which is being offered to our members, please find below the following comparisons:
- The level of retirement benefit in the Hull Trains Pension Scheme is based on an individuals pensionable service and average final salary in the last year of their membership in the scheme. This is known as Final Salary or Defined Benefit. The Hull Trains Pension Scheme therefore offers members a promise that at retirement that they will receive a certain level of pension at retirement.
- The level of pension in the IWDC scheme is dependent on the amount of contributions made into an individual’s ‘pension pot’ and investment returns. The level of pension at retirement, if you take this option, is also reliant on the annuity rates being offered at the time of you retiring.
- IWDC schemes offer no such promise, and while a pension will be payable at retirement it is almost impossible to calculate the level of pension as a result of the volatility of investments and fluctuating annuity rates etc.
Based on the above it is almost certain that the level of benefits being offered by the Hull Trains Pension Scheme will be far greater than the IWDC arrangement.
The IWDC pension schemes is not comparable in regard to the security and level of pension a worker will receive as a result of a being a member of a Hull Trains Pension Scheme. As stated above one offers a promise and one simply does not.
While the RMT is not attempting to give Independent Financial Advice, it is important that members and our representatives have a basic understanding of what potential benefits they could expect to receive at retirement from the two different pension arrangements.
Below are three examples of the contribution’s members could be paying into the two arrangements and the benefits they could expect to receive after 5,10,15 and 20 years.
Example 1
Hull Trains Pension Scheme
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Pensionable
Salary
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Four Weekly Contributions before tax
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Four Weekly Pension After 5 Years
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Four Weekly Pension After 10 Years
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Four Weekly Pension After 15 Years
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Four Weekly Pension After 20 Years
|
£20,000
|
£78
|
£64
|
£128
|
£192
|
£256
|
Separate
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Lump Sum
|
£2,400
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£5,000
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£7,500
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£10,000
|
IWDC Pension (no separate lump sum)
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|||||
£20,000
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£154
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£42
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£89
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£138
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£193
|
Example 2
Hull Trains Pension Scheme
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Pensionable
Salary
|
Four Weekly Contributions before tax
|
Four Weekly Pension After 5 Years
|
Four Weekly Pension After 10 Years
|
Four Weekly Pension After 15 Years
|
Four Weekly Pension After 20 Years
|
£30,000
|
£152
|
£125
|
£251
|
£375
|
£500
|
Separate
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Lump Sum
|
£3,750
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£7,500
|
£11,250
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£15,000
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IWDC Pension (no separate lump sum)
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|||||
£30,000
|
£230
|
£64
|
£133
|
£207
|
£289
|
Example 3
Hull Trains Pension Scheme
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Pensionable
Salary
|
Four Weekly Contributions before tax
|
Four Weekly Pension After 5 Years
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Four Weekly Pension After 10 Years
|
Four Weekly Pension After 15 Years
|
Four Weekly Pension After 20 Years
|
£40,000
|
£230
|
£190
|
£379
|
£568
|
£757
|
Separate
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Lump Sum
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£5,000
|
£10,000
|
£15,000
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£20,000
|
IWDC Pension (no separate lump sum)
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|||||
£40,000
|
£307
|
£85
|
£176
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£276
|
£385
|
- All examples are based on a retirement age of 62
- IWDC examples illustrate a member contribution rate of 10%
- IWDC benefits are based on full pensionable pay and a total contribution rate of 20%
- IWDC four weekly pension based on an investment return of 6%
- Hull Trains Pension Scheme contributions are based on a section pay at a rate of 10.12%
- IWDC examples are based on a member choosing to have inflation protection on their pension.
- DC Source: https://www.which.co.uk
- Past service benefits in the Hull Trains Pension Scheme are protected so these are not included in the above examples
While it is important to note that the Defined Contribution illustrations above can go up or down, depending on investment returns and annuity rates, it would be fair to assume that ‘pound for pound’ the IWDC arrangement is very unlikely to offer the level of benefits being offered by the Hull Trains Pension Scheme. As you will also note member contributions are also lower in the Hull Trains Pension Scheme compared to the IWDC arrangement so members will be paying a lot more for a lot less.
As I have indicated at the beginning of this circular it this unions intention to defend our members pension rights and we will therefore be shortly beginning a ballot process which will give our Hull Trains members the chance to send a clear message to management and the parent company First Group that they are not prepared accept this outrages and totally unnecessary proposal.
I will keep you informed of developments.
Yours sincerely,
Mick Cash
General Secretary