My Ref: MRP 1/8/3 12th February 2016
Circular Num: NP/058/16
To: The Secretary All Branches & Regional Councils
NETWORK RAIL CARE 2015 ACTUARIAL VALUATION & ENDING OF CONTRACTING-OUT PROPOSALS
Following the 2015 actuarial valuation of the Network Rail CARE pension scheme the results reveal a surplus of £8.2 million. Initially the scheme actuary had indicated that the fund had a deficit of £32.5m which would have resulted in the Future Service Joint Contribution Rate (FSJCR) increasing as follows:
- Members 7.2% to 12.2% / Employer 10.9% to 18.36%.
As a result of the actuary changing the valuation assumptions, in particular the discount rate, this has resulted in the scheme having a surplus of £8.2m which results in the following FSJCR:
- Member 7.2% to 7.48% / Employer 10.9% to 11.22%
However, resulting from the ending of Contracting-Out in April 2016 Network Rail have indicated that their increase in National Insurance Contributions associated to the CARE pension arrangement will increase their payroll costs by approximately £3 million per annum which they have proposed to recoup.
Management have proposed to recoup their National Insurance Contribution rebate by changing the method in which members’ annual accrual is revalued from RPI to CPI for future service only. It is anticipated that this will result in savings of £4.9 million per annum of which the employer will receive 60% of this amount i.e. £2.94m per annum. This saving is generated by reducing the FSJCR, see below.
The change in revaluation and the fact that there is a surplus in the scheme allows the FSJCR to reduce as follows:
- Member 7.2% to 5.92% / Employer 10.9% to 8.88%
This item was placed before the National Executive Committee on 9th February where the following report was adopted:
“That we note the proposals on file in respect of the employer’s intention to recoup their National Insurance Contribution rebate which will result when contacting-out ends in April 2016.
We instruct the General Secretary to inform the management of this union’s acceptance of the CARE contracting-out proposals.
It is noted that members of the CARE arrangement have the opportunity to join the Network Rail section of the Railways Pension Scheme once they have five years employment service.
While this union unable to advice members to switch pension arrangements we instruct the General Secretary to request that management endeavour to insure that members of the CARE and NRDC arrangements are adequately informed of their right to switch to the Railways Pension Scheme once they reach five years company service.
It is also noted that those employees who missed the opportunity to switch to the Railways Pension Scheme once they had completed five years employment service are to be given a another chance to do so. We therefore instruct the General Secretary to insure that management advertise this opportunity adequately.
Branches and Regional Councils to be informed.”
I will keep you informed of any developments.