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ScotRail RPS Proposal

10 February 2016

 PROPOSAL

The proposal of Abellio Scotrail Section of the RPS is to adopt the framework recommended by the Informal Pensions Steering Group. The elements of the proposal are:

 

1.       The age at which benefits may be taken without reduction for early payment to move from 60 to 62

·         To apply to benefits accrued from 1 April 2016.

·         Cost neutral early retirement factors to apply to pension taken before age 62.

This means that if benefits are taken at 60 those benefits earned before the date of implementation will not be reduced and only those earned after the date of implementation will be reduced on a cost neutral basis on account of being paid 2 years’ early. For people near to retirement or for those who retire at or after age 62 this change will have little or no effect on benefits.  

·         Applies to all new and non-protected members of the scheme.

·         Does not apply to protected members  or those with indefeasible rights

·           Change will not apply to members with protected rights. However they may choose to benefit from lower contribution rates, in which case they will need to sign a waiver for this specific part of Protection only.

·           Change will not apply to indefeasible rights members. However they may choose to benefit from lower contribution rates by formally consenting to this particular change.

 

2.       Pensionable pay increases capped to RPI plus 0.25% for past service

·         All increases in pensionable pay in a year to be restricted to RPI plus 0.25% (includes all pay awards, merit and promotions).  This reduces the past service liability which, providing the assumptions remain the same, in turn reduces the joint contribution rate payable.

·         All existing elements of pensionable pay to continue to be pensionable but any increases over the year in excess of the cap will only accrue benefits for future membership from the effective date of the increase.  These excess increases to be treated as new Pensionable Restructuring Premium (PRP).

 

This change to apply to all members including new entrants, protected and indefeasible rights members.

·         If someone receives one or more pay awards, pay rise and or promotion in the same year the combined awards will be subject to the pensionable pay cap.

·         The September RPI will be used as the reference RPI for pensionable pay capping purposes; this is in line with that used by the Scheme Actuary.

·         The reference year for the pensionable pay cap will be 1 April to 31 March each year.

 

Implementation of changes to contribution rates, to coincide with changes to NICs, is proposed for Tax Year 2016/17 which starts for pay purposes on 03 April 2016.

 

impact

The changes described above allow both member and employer pension scheme contributions to be reduced, albeit for the employer not by an amount sufficient to fully recoup the higher NIC costs arising from the cessation of contracting-out for a period of up to 12 years.  Broadly a higher State Pension from State Pension Age should offset any reduction in pension scheme benefits.

Based on actuarial calculations by Towers Watson ( CONFIRMED ON 22 December 2015) the estimated impact on the Abellio Scotrail  Section contribution rates for protected and non-protected members for the 2016/17 Tax Year is shown below:

 

Estimated Contribution Rates from

16/17 tax year

Member

(40%)

 

Employer

(60%)

 

Overall impact (100%)

 

Protected

Non-Protected

 

Protected

Non-Protected

 

Protected

Non-Protected

Current Contribution rate

9.32

9.32

 

13.98

13.98

 

23.30

23.30

Reduction

1.88

2.8

 

2.82

4.20

 

4.7

7.00

Revised Contribution rate

7.44

6.52

 

   11.16

9.78

 

18.60

16.30

 

Based on the current 2015 payroll these changes are expected to give rise to an annual reduction in employer contributions of £3.8m, compared to an estimated higher annual NIC cost of £3.9m referred to above.

The annual reduction to member contributions across membership as a whole is expected to reduce by £2.6m (pre tax) compared to an estimated increased NIC cost of £1.6m (post tax). 

Although member pension contributions are reducing by an amount greater than the member NIC increase, the effect on post income tax take home pay in most cases will be broadly neutral. 

Members who are not currently salary sacrificing their pension contribution can increase their take home pay by participating in the salary sacrifice arrangement.

 If you are a TSSA member in ScotRail vote here www.surveymonkey.co.uk/r/ScotRailRPSChanges 

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