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UPDATED: Letter to Alex Salmond: Occupational Pensions in an Independent Scotland

18 September 2014

TSSA asks Scotland's First Minister to clarify important uncertainties about how occupational pension schemes - notably the multi-billion pound Railway Pension Scheme - would be impacted by becoming subject to strict EU rules on the funding of cross border schemes.

POLLING DAY UPDATE: TSSA first contacted the Scottish Government regarding this issue a year ago. Having received no reply, we recently made one last attempt to clarify this matter by writing to the First Minister himself, in the hope that his reply may help our members decide how to vote.

We have today received a message datestamped '18 September 2014' - polling day itself. Sadly, the message fails to provide any answers to our questions on how the many millions of pounds of our members' assets would be treated in the event of independence.

The message merely assures us that 'A reply will be provided to you as soon as possible.'

scottish-pensions-letter.jpg

 

POLLING DAY UPDATE NUMBER TWO: These letters, it seems, have gone from being like Edinburgh trams to Edinburgh buses - nothing ever comes, then you get two replies almost at once.

A further letter received today is more substantial, but still fails to give any certainty about what is likely to happen to these large pension schemes, in which millions of pounds of our members' money is entrusted. The letter sadly does not provide the assurances we have been seeking to allow our members to make a better-informed decision today.

  Scottish Government pensions letter

 

  Letter to Alex Salmond on occupational pensions

Alex Salmond
First Minister
St Andrew’s House
Regent Road
Edinburgh   
EH1 3DG       

15 September 2014

Dear First Minister,

Occupational Pensions in an Independent Scotland

I am writing to you today in the hope that you will be able to offer some reassurances to my union in respect of the occupational pensions of our members should Scotland vote Yes on Thursday.

Many of our members in Scotland work for companies who will operate on different sides of the border such as Network Rail, East Coast, Virgin and Thomas Cook. Independence will in effect create cross border schemes for all those sections of the Railway Pension Scheme that have members employed in Scotland and England & Wales.

The Pensions Act 2004 introduced a number of provisions relating to cross-border activities under the EU Pensions Directive.  Amongst other things, the Directive requires that non-money purchase cross-border schemes are fully-funded at all times.  Our understanding, as a union that operates its own cross border scheme in respect of employees in Ireland, is that UK law currently interprets this as meeting the statutory funding objective introduced by the Pensions Act 2004. Would this continue to be the case in Scotland post-independence?

In addition, in order to be authorised, cross-border schemes must obtain annual actuarial valuations, with any deficit against the statutory funding objective being removed within 24 months of the valuation’s effective date.  As well as the extra cost of annual valuations, given the most recent and projected valuations of the various sections of the RPS, we are concerned about the much shorter timescale for dealing with deficits.  This has obvious serious implications for both members and employers.

Alternatively, in order to overcome cross border regulations it may be possible to establish ‘Scottish’ (sub)sections for all those sections affected.  However, this approach is unlikely to be without its difficulties and may change significantly fund profiles that may impact on funding levels.  This approach would also, no doubt, incur substantial additional costs in setting up the Scottish sections.

The costs associated with these provisions are significant and in my experience the most common employer response is to seek to close the scheme before it gets caught up in the regulations.

What assurances can you offer in terms of your plans to ensure that a Yes vote for independence will not be allowed to threaten the future viability of the occupational pension schemes of my members post 2016?

Yours sincerely
 
Manuel Cortes
General Secretary

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