My Ref: MRP 1/8/24 22nd January 2016
Circular Num: NP/030/16
To: The Secretary All Branches & Regional Councils
SOUTH WEST TRAINS & ISLAND LINE SECTIONS OF THE RAILWAYS PENSION SCHEME– ENDING OF CONTRACTING-OUT PROPOSALS
As you will recall from previous Circulars as a result of Government legislation defined benefit pension schemes which currently contact out of the State Second Pension will no longer be able to do so from April 2016. Both members and employers will see an increase to their National Insurance Contributions (NIC) of 1.4% and 3.4% respectively as the rebate associated to contracting-out is abolished.
While members will have no choice but to accept the increase in NICs, the Government has put in place legislation which will allow employers to recoup their additional payroll cost by either changing future service benefits or/and increasing contributions. However, the employer still has to consult with members.
Please note the employer has to seek actuarial advice and cannot recoup more than the rebate.
The RMT and our sister unions have been meeting with TOC employers through the Informal Pensions Working Group (IPWG) to find a set of generic proposals which could be used across all TOCs. The final proposals (framework) which were agreed by the RMT General Grades Committee on 1st December 2015 are:
- Cost Neutral Early Retirement Factors to age 62 for non-protected members
- Pensionable pay increases capped at RPI + 0.25% with any increase above the cap being pensionable for future service only. This change affects protected, indefeasible right and non- protected members.
In accordance with these proposals South West Trains (SWT) management informed our representatives that they intend to recoup their NICs rebate and wish to use the IPWG framework proposals.
Management have indicated that their additional payroll costs for both the SWT and Island Line sections of the Railways Pension Schemes will be £4.27m per annum. The above proposals will recoup £3.98m per annum.
As a result of the above proposals contributions will reduce for members and the employer.
This item was placed before the General Grades Committee now the National Executive Committee on 17th December 2015 where the following resolution was made:
“That we note that this is in line with the IPWG (proposals) and that our Lead Officer and Representatives are recommending acceptance.
Therefore we instruct the General Secretary to advice the Company of our acceptance.”
For further information on the ending of contacting and the IPWG framework proposals please go to http://bit.ly/1Vd7ytS or refer to Circular No. NP/256/15 of 18th December 2015.