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Pensions

23 October 2010

On 10 September 2010, the Railways Pension Trustee Company wrote to members of the three Jarvis sections of the Railways Pension Scheme (RPS).

The letter is a further update about the work that has been taking place to cover the prospect that the Pension Protection Fund (PPF) will assume responsibility for the three Jarvis sections of the RPS. In particular, it refers to legal advice obtained by the Trustee regarding those members who are “Protected Persons” under the terms of the Railways Act 1993. Although the Railways Act 1993 requires members’ pension rights to be at least as favourable as the rights under the BR Pension Scheme, the legal advice obtained by the Trustee was that in the event of employer insolvency, the PPF legislation, assuming the PPF assumes responsibility for the three sections, is that Protected Persons will be entitled to the PPF level of compensation rather than their full accrued benefit that would have been applicable had Jarvis not gone into administration.

This means that the following will apply:

-# If a member was aged 60 or over when the Assessment Period began, there will be no immediate change in the

level of benefits. However, future increases in benefits from the PPF will be in line with inflation limited to 2.5% per

annum on the pension earned after April 1997. Pension earned before April 1997 does not increase in payment.

Under the RPS, pensions would have increased in line with inflation.
-# If a member was under 60 when the Assessment Period began, their benefits are lower from the PPF in two ways:

firstly, benefits are reduced to 90% of their level under the RPS; and secondly there is a maximum limit to the annual

pension payable. For example, the maximum limit payable from age 60 is currently just under £27,000 (after

allowance is made for the 90% adjustment). A lower limit applies at lower ages. The same restrictions on pension

increases in payment as mentioned at 1. above apply.
-# If a member is in receipt of a benefit either through ill-health or as a dependant, then there is no immediate change.

Again, future increases to pensions in payment are restricted as described at 1. above.

It is recognised that this will be a severe blow for some protected members, coming as it does on top of the loss of their jobs, contractual redundancy payments and outstanding pay. Whilst their natural strength of feeling and sense of outrage at the injustice suffered is fully appreciated, it is regretted that taking more legal advice that would simply confirm the Trustee’s advice would do nothing to add to the value of their pensions benefits.

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