RDG urges risk-sharing mechanism
The Rail Delivery Group wants a risk-sharing mechanism with government over the issue of train operator pensions.
RDG believes that without this support from government, the consequences for taxpayers and customers are clear. Government is also warned that The Pension Regulator’s patience is not unlimited, and RDG and train operating companies (TOCs) believe that the lack of sufficient government support would crystallise events in an unstoppable manner.
In a letter sent to Rail Minister Andrew Jones (dated April 1, and seen by RAIL), RDG Chief Executive Paul Plummer wrote: “We consider that the risk-sharing that we propose does not in practice import any greater risks for Government than already exists under the current franchising agreements, but it does provide the Pensions Regulator, Trustees and employers with documented support against unexpected outlier events.”
Plummer told Jones that a previous letter sent on March 5 outlined two positive developments which reinforced the RDG’s view of “the real possibility that the RDG Pensions Framework, if supported by the DfT risk-sharing, would enable the industry to create a sustainable and cost-effective Pensions Framework for TOC Sections in the Railway Pensions Scheme”.
Plummer wrote in his April 1 letter: “RDG and its members have worked hard to get positive endorsement of the Framework from the various stakeholders, and it represents now the only possible means to provide a crossindustry solution to evolve Train Operator Pensions in a sustainable way without significant cost and disruption to the industry and its customers.”
There is a recognition that work is still needed, “particularly around investment strategy and the scale and timing of increased pension contributions for some TOC sections”, according to Plummer.
He also wrote: “We consider there is at present a valuable window of opportunity for all parties to work together to secure the stable funding of the scheme. If we cannot realise this within the next month or two, then without the Framework and necessary risk-sharing to solve the train operator pensions issue, the consequences will be severe.”
Plummer warned that TPR could impose its parameters across all 27 TOC sections, and seek immediate and significant increases in contributions totalling £2.6bn. This could break the scheme, he wrote.
The impact on taxpayers would be through the adverse financial impact on franchise bids. Furthermore, Plummer warned that the ability for the DfT to let future franchises in circumstances of such uncertainty would be put in jeopardy, whatever the outcome of the Williams Review.
He also warned of lengthy and costly legal disputes caused by the evaporation of stakeholder support from Trustees and employers across a large portion of the franchises. Industrial action would also be certain and widespread, while current discussions between employers and trade unions regarding the scheme and potential future benefit reform (including the extension of retirement age for new joiners), which Plummer described as “constructive”, would almost certainly cease.