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Network Rail: Talks Begin on RPS Valuation

26 August 2011

The Pensions Forum met on 22 August to discuss the draft valuation of the Network Rail Section of the Railway Pension Scheme (RPS) including possible ways of addressing the funding shortfall this has disclosed. TSSA representatives attended with a clear remit to maintain an affordable and sustainable final salary pension scheme.

 Affordable Options to Eliminate the Deficit

The main message from the latest valuation (31 December 2010) is that the NR Section of the RPS funding stood at 91.9% - 5.1 percentage points worse than the last valuation at the end of 2007. The purpose of the meeting was to consider options to eliminate this deficit while maintaining Scheme stability and affordable contributions for members.

The initial proposal presented by the company was to increase member contributions from 11.6% to 13.08% that would correct the funding shortfall over a recovery period of 10 years. While all parties agreed that remedial action was necessary, it was also agreed that the Section was not currently in a state of crisis and options should be openly considered in the first instance.

Your representatives expressed the view that extending the deficit recovery period beyond 10 years would allow for a smaller increase in contributions while still ensuring the scheme was fully funded within an acceptable time scale. NR’s Head of Pensions agreed to get the Actuary to cost a range of options including a longer deficit recovery period. We can expect to have the figures within 3-4 weeks, following which we will seek members’ views. All union representatives advocated removing the 5-year waiting period to join the RPS. Unfortunately, NR refused to consider this. It is our view that the financial position of the scheme continues to be worsened by this restriction.

The Wider Picture

Government plans to introduce a new higher rate State Pension may positively influence the financial position by reducing the liabilities of the Scheme. However, we are currently lacking specific details of how and when the Government will introduce this. Until the situation becomes clearer, it is our view that we should not agree to massive changes to benefits that a newly introduced State Pension may render unnecessary longer-term. We have requested that the Actuary costs the impact of a higher rate State Pension. We will be consulting members’ views when the requested information is available.

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