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RPS - It's Your Pension, Have Your Say!

25 November 2011

You will be aware that TSSA has been meeting Network Rail along with the other trade unions (RMT and Unite) since August working towards an agreed solution to eliminating the £331 million deficit in the NR Section of the Railways Pension Scheme. After consulting our National Reps and Pensions Champions on the Company’s latest proposals, a meeting of the Pensions Forum was held last Friday at which NR, TSSA and the other trade unions set out their respective positions.

Decision Time

From the outset, discussions on the results of the most recent actuarial valuation, there has been an open and healthy debate on the issues involved with significant progress made on a way forward. Discussions at the most recent TSSA reps’ meeting considered two options (outlined below) put forward by the company. After some debate, our reps favoured the ‘alternative approach’ and, subsequently, the Company was advised of this. Crucially, however, both RMT and Unite through their organisations’ decision-making processes have arrived at a different position and have indicated they favoured Network Rail’s so called ‘preferred approach’. The outcome is that TSSA is now the only party that does not favour this ‘preferred approach’. Furthermore, the ‘alternative approach’ has effectively been withdrawn – the ‘preferred approach’ now being the only ‘offer’ on the table.

Network Rail have made it absolutely clear that they are very eager to present the RPS Trustee with a unanimous proposal for eliminating the deficit. Conditional on TSSA changing our position and signing up to the ‘preferred option’ Network Rail is prepared to make a one-off additional contribution of £5 million. Given the current position we are now asking our members to let us know their views on how to proceed. Please complete the enclosed referendum paper as soon as possible (closing date: 12 December). Although we have achieved a number of significant improvements on proposals originally tabled, we have now reached the point where members need to be given the opportunity to accept or reject the only offer on the table. Members need to be clear that the only realistic way of getting further improvements will be by being prepared to take industrial action, bearing in mind that the other two trade unions have already indicated acceptance of the Company’s ‘preferred option’.

The Company’s “Preferred Approach”:

  • Capped general pay increases at RPI + 0.5% per annum for all RPS members (including protected) for pension purposes. (Note: This does not entail a cap on annual wage increases, but on the pensionable element of general pay increases)
  • In addition, promotional increases from a change in Grade/Band/Role Level counting for future service only (achieved through a binding pay agreement outside of pension scheme rules)
  • £331m deficit eliminated to become a surplus of £55m due to above cost reduction for scheme funding calculation purposes
  • Contributions reduce from 11.6% to 9.36% from April 2012 to June 2018, then 8.72% from July 2018
  • Introduction of RPS2 from July 2012:
    • Voluntary by means of a one off option for existing members at introduction, but mandatory for all new scheme joiners on meeting existing eligibility requirements (excluding protected members but including those with indefeasible rights and employees now in a five year waiting period on completion of their five years’ service)
    • Normal pension age 65 for future service (with cost neutral early retirement factors to 65 for future service)
    • Capped general pay increases at RPI + 0.5% plus promotional pay increases count for future service only
    • Removal of automatic 1/40 lump sum for future service, coupled with State Pension (BSP) offset reducing from 150% BSP to 75% BSP for future service (the balancing additional cost being funded by additional contributions on usual 60:40 basis)
    • All member contributions paid by SMART (salary sacrifice):
      • 7.92% from July 2012 to June 2018 (former Section pay)
      • 7.28% from July 2018 (former section pay)

It should be noted under the above approach that RPS and RPS2 benefits are regarded as being within one scheme, therefore any current and future deficit pension contributions will be spread across the combined membership; contributions as intended to reflect the different benefit scale provided. Final contributions rates and those payable at future actuarial valuations will be set by the Trustee, following advice from the Scheme Actuary and reflecting the experience of the RPS at that time.

The “Alternative Approach”

The proposed alternative, supported by TSSA reps following their last meeting but now withdrawn by the company, was laid out as follows:

  • No benefit or pensionable pay changes, deficit reduces from £331m to £258m (including protected)
  • 15 year deficit recovery for 2010 deficit, starting April 2012
  • Member contributions increase from 11.6% to 12.44% from April 2012 to June 2018, 11.8% from July 2018 to March 2027, then 10.28% from April 2027
  • RPS2 conditions as per “preferred approach” but SMART contributions as follows (former section pay): 9.44% from April 2012 to June 2018, 8.80% from July 2018 to March 2027, 7.28% from April 2027

The Potential Consequences of Rejecting the Proposal

Network Rail want staff to support their ‘preferred approach’. However, if you want your representatives on the Pensions Forum to reject this approach, you should be aware that the Company would withdraw the £5 million one-off additional contribution to the Scheme. They would need to present a majority (NR, RMT and Unite) recommendation to the Trustee without TSSA support. Alternatively, they could allow the actuary to impose bigger contribution increases (from 11.6% to 13.08%) based on a 10-year, rather than a longer 15-year, deficit recovery plan, as originally proposed by the actuary.

Further Information

Our previous communication on the Network Rail RPS talks can be found here:

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