£7.5bn railway pension gap

TRAIN companies are facing a pensions black hole estimated to be worth £7.5bn.

The Pensions Regulator has warned it has ‘serious concerns’ about the widening of the shortfall in the Railway Pension Scheme, which ballooned from £4.8bn to £7.5bn in the space of three years between 2013 and 2016.

It raised its worries in a letter sent to advisers representing industry body the Railway Delivery Group. The retirement scheme has around 340,000 members.

A row over who has responsibility over the railway pension scheme liabilities has broken out after the Department for Transport disqualified Stagecoach from bids for three rail franchises at the 11th hour on Wednesday.

The Government claimed that Perth-based Stagecoach had failed to follow the rules of the bids, but the firm insisted that the DfT had included new terms that put the burden of underwriting pension commitments on to rail operators.

Stagecoach claims this was not the previous protocol as the Government had traditionally been the guarantor of the pension scheme. It is not clear whether the Government will continue to be the guarantor of the pension scheme, if it will be shared or if the buck will be passed on to rail operators.