Railways Pension Arrangements – Valuation of the RPS as at 31st December 2007
Finalisation of the Railways Pension Scheme’s valuation as at 31st December 2007 was delayed arising from the Trustee’s decision to include an additional reserve in recognition of the significant reduction in asset values following the turmoil in international financial markets. However, the situation for the majority of Sections at the valuation date has now been determined and sent to the respective employers. Employers will therefore soon be approaching our representatives and Pension Committees, where these have been established, to discuss the results and proposed contribution rates for the future.
As advised previously, Sections will face a rise in contribution rates to cover the increased cost of buying future benefits. Some Sections will also experience an additional requirement to cater for a past service deficit, ie where scheme assets are less than the benefits promised to date. In recognition of this fact, I have held discussions with the General Secretaries of our sister Unions in an endeavour to agree a standard policy with a view to reducing contribution rates from those determined by the Actuary’s standard funding assumptions and also to resisting potential employer attacks on benefits.
RMT is aware from our discussions with employers through the Pension Working Groups that an objective is reduce employment costs through cutting benefits and increase the minimum retirement age to 65. The TOCs also wish to introduce a CARE scheme.
Through our discussions we have identified measures which reduce the future joint contribution rate(JCR). For example; if the Actuary assumes future pay increases to be RPI+1% instead of RPI+1½%, the JCR falls by approximately 1.5%. Likewise, assuming the future promotional scale increases are 0.4% instead of the standard 0.7%, saves a further 0.25% on the JCR. Similarly, moving to cost neutral Early Retirement Reduction Factors between age 50 and 60 results additional savings; 1.2% on average for the Train Operating Companies.
Obviously the reductions achievable will vary from Section to Section, but members will immediately recognise that making minor adjustments such as those outlined above can have a significant impact on the Joint Contribution Rate and assist in keeping contributions within an affordable range.
This matter was considered by the General Grades Committee yesterday, where the following decision was recorded:
“We note a meeting has taken place with the General Secretary and the General Secretaries of our sister Unions; ASLEF, TSSA & Unite. We recognise the importance of a joint Union strategy in protection of our members’ pensions. A joint strategy should encompass the following:
- Opposition to the introduction of a CARE Scheme.
- Any proposals or revision of contribution rates or revision of benefits should examine Early Retirement pre 60 years of age – cost neutral factors to apply.
- Apply a deficit recovery plan to correct any deficit over a nine year period if necessary.
- Further, to recommend actuarial revision on pay increase effects.
- The General Secretary to write to all Branches and Regional Councils on the current position and highlight our objectives and our opposition to the CARE Scheme and importance of the survival of the RPS.”
In the circumstances, I would stress that in discussion with management our negotiators should adopt the following policy:
- Oppose the introduction of a CARE Scheme.
- Apply cost neutral reduction factors to early leavers to age 60.
- The Actuary should assume future pay increase to be RPI+1% instead of RPI+1.5%.
- Deficit recovery payments, where necessary, should be payable over nine years
I shall, of course, keep you advised of developments, but in the meantime would request that Head Office should be kept advised of any employer proposals dealing with the valuation results.