TENS OF thousands of rail workers in dozens of infrastructure and operating companies will be balloted for strike action if the employers fail by April 28 to agree unconditionally to a formula that will avert a pensions crisis in the industry.

Rail unions RMT, TSSA, ASLEF and engineering union CSEU are seeking employers' commitment to ensuring that the Railway Pensions Scheme remains open to all employees, capping employee contributions to a reasonable level, maintaining benefits and streamlining the proliferation of sections within the scheme created by the fragmentation of privatisation.

The unions have warned that they want an agreement reached before unacceptably high employee-contribution increases are triggered by default on July 1.

The dispute, involving every train-operator, Network Rail and dozens more infrastructure companies, has raised the possibility this summer of the first industry-wide shutdown since the general strike in 1926.

"We have written to every employer in the RPS seeking an unconditional undertaking on our four key demands, and if that is not received by 4pm on April 28 we will be in dispute and the next step will be ballots for strike action," RMT general secretary Bob Crow said today.

"We have asked the government to help get the employers around the table but have had no response so far, although we will be meeting Derek Twigg, the transport minister, next week and will impress on him the urgent need for action to protect the scheme," Bob Crow said.

"Our members have packed into meetings around the country to tell us that they are not prepared to allow their pension scheme to disintegrate before their eyes or suffer the massive contribution hikes that will be triggered on July 1 if no agreement is reached," TSSA general secretary Gerry Doherty said.

"Doing nothing means accepting the eventual collapse of the Railways Pension Scheme and the prospect of poverty in retirement. That is simply not an option, and if that means industrial action, then so be it," Gerry Doherty said.

"We are calling a halt to attacks on our hard-won pension rights and it is time for the government and employers to start talking to us seriously," said CSEU railways officer Bob Rixham.

Notes to editors, contacts and briefing follow:

Notes to editors:

Mass meetings of rail workers, addressed by leaders of the four unions, will be held at 18:00 tonight (Wednesday) in Manchester at 18:00 at the Mechanics? Institute, 103 Princess Street, and at 18:00 tomorrow (Thursday) at the Camden Centre, Bidborough Street, London NW1.

Further meetings are also scheduled for April 25 at the Newcastle Labour Club, Leazes Lane, and on May 10 in Liverpool at the CASA, 29 Hope Street

Mass meetings have already been held in Cardiff, York, Glasgow, Edinburgh, Birmingham, Bristol and Perth

A lobby of parliament has been arranged by the four unions from 13:00 on Tuesday, May 9

For further information please contact:
Derek Kotz at RMT on 020 7529 8803 or 07939 595 092,
Carmel McHenry at TSSA on 020 7528 8055 or 07834 866 854

Press Briefing ? Railway Pension Scheme

(March 6, 2006)

The Railways Pension Scheme

The major Rail Unions, RMT, ASLEF & TSSA, and CSEU, are extremely concerned at the threat to the future of the scheme following the recent actuarial valuation of the Railways Scheme which in many cases will force members contributions to an unacceptably high level.

The RPS is a sectionalised joint industry pension scheme with over 90 sections catering for circa 100 different employers. The triennial valuation, as at 31 December 2004, has revealed deficits in the majority of Sections. These deficits have arisen partly from lower than expected returns from the financial markets, but mainly from the actuary amending mortality assumptions to provide for members living longer. As a result members? contributions are set to rise to unacceptable levels. Some employers are also considering reducing benefits.

We have four key demands.
* Cap employee contributions at 10.56%;
* Keep benefits at least at their current level;
* Streamline the scheme to have three active sections (Train Operating Section, Engineering & Infrastructure Section and an Omnibus Section); and
* Keep the scheme open to all employees.

What are the issues?

1. The threat to rail workers? pensions

1.1 The old member contribution rate for the BR Pension Scheme prior to the surplus declared in 1988 was 10.56%. The valuations of the various sections of the Railways Pension Scheme (RPS) were declared late last year with the results showing around two-thirds of sections have significant shortfalls.

1.2 The original proposal was to clear the deficits over nine years. This would result in only three Train Operating Company Sections having member contribution rates lower than ten per cent. Most would be nearer 11 per cent and the highest 18.65 per cent. For Engineering/Infrastructure Sections the situation was even worse with default rates ranging between 11.02% and 21.12%. Alarmingly several rates were in excess of 14%.

1.3 On February 22nd, following a letter of comfort from the Department of Transport, the Trustees agreed deficits for the TOCs could be repaid over fifteen years. They also agreed other Sections periods up to twelve years. While this will ease the situation slightly for some sections, the majority of Sections still have unacceptably high contribution rates.

1.4 The new rates will be introduced with effect from 1st July unless alternative arrangements are agreed.

2. Reasons for the Pensions Shortfall

2.1 These deficits have arisen partly through poor financial returns, but also as a result of the Actuary changing mortality assumptions on the basis that pensioners are living for longer.

2.2. Complexity and multitude of sections in the RPS (circa 100).

2.3. Joint employer/employee contribution rates for sections where the employer has closed the scheme to new entrants are 3% to 4% higher than for open sections. This means that for individual workers in these sections their actual contributions have increased. It is totally unacceptable for employees to pay higher pension contributions merely because the employer takes a business decision to reduce employment costs.

2.4 Train Operators have run off surpluses by taking a short term outlook ensuring they gained as much of the former BR surplus as possible before their franchises expired rather than planning for the long term.

3. What this will mean for railworkers

3.1 The RPS is a shared-cost scheme with members paying 40% of the cost of future benefits. Surpluses in the old BR Scheme provided reserves to allow members to pay contributions at 5%. Until the 2001 valuation member contributions in most Sections were still 5% but were gradually rising to the level required to buy future benefits. Members are now being faced not only with a earlier rise to the level required to buy future benefits but also significantly greater contributions to fund deficits.

3.2 It is unacceptable to expect members to pay for the increased longevity of pensioners and deferred pensioners, many of whose service extends back before privatisation. These debts should be absorbed by the employer as but for privatisation the employer would have picked up the higher contributions in respect of pensioners.

3.3 The rail unions are concerned that members will be unable, or unwilling, to pay ever-higher contributions, as there is a finite limit to the increases individuals are able to absorb before deciding that the Scheme is unaffordable.

3.4 Each individual opting out means deficits become the responsibility of fewer members, thus increasing contributions further for those who remain.

3.5 In addition, if those who opt out are predominantly younger members, the average scheme age would rise, requiring additional increases to compensate for the Section?s older age profile.

3.6 These events could result in an uncontrolled spiral of increased costs and reducing membership, undermining pension provision within the railway industry.

3.7 The unions are also aware that behind the scenes many employers are discussing closing the RPS and introducing inferior arrangements. They want people to work until 65, only have inflation proofing of 2.5% instead of full RPI, have pensions based on the career average earnings instead of being based on the final year?s salary, and no ill-health benefits.

4. Why rail companies and Government have a responsibility to act.

4.1 Employees recruited since privatisation would not have realised contributions could continue to rise inexorably. Even protected members (those employed at privatisation) who understood the possibility of fluctuating contributions would not have anticipated becoming responsible for deficits attributable to pensioners and deferred members arising from changed actuarial assumptions.

4.2 All the current railway employers have enjoyed surpluses built up during the latter BR years when thousands of railway staff left the industry in preparation for privatisation. It is totally unfair to expect existing members to pay higher contributions merely because the Actuary?s assumptions have changed, or because the employer has taken a business decision to reduce employment costs by closing their Section to new employees.

4.3 Even worse is the fact that following reorganisation of franchises by the Government some members have been forcibly placed in closed Sections with higher contribution levels than their previous sections.

4.4 Some employers also have the temerity to expect members to pick up the tab for company ?Brass-matching? payments since 31 December 2004. Brass ? British Rail Additional Superannuation Scheme ? is an AVC arrangement where following the reduction in contributions in 1988 the employer matched individual AVC payments up to 5% of pensionable pay. While surpluses existed, employer Brass matching was payable from the fund itself rather from the employer?s own assets. However, upon dissipation of the surplus, the employer becomes responsible for matching payments. Despite the fact that in those Sections where there is a deficit, the shortfall was declared at 31 December 2004, employers are only willing to pay their own Brass matching from a forward date. This effectively means employees will be paying 40% of employer Brass matching costs from 31 December 2004 until the contribution rate changes. This is not only unethical but morally indefensible. Since privatisation employers have been ripping off the Government and the tax-payer with massive state subsidies and taking advantage of valuable pension-scheme surpluses created under British Rail; they are now trying to pilfer assets belonging to the pension fund and expecting members to pay higher contributions to make up the difference.

4.5 Professor Jean Shaoul of Manchester University has calculated that since privatisation around £800m a year is taken out of the industry as returns to private lenders and investors. The rail unions believe that but for privatisation contributions would be kept to a realistic and affordable level.

4.6 The RPS?s problem is not the cost of paying for future benefits, but the past service deficits created by a change of actuarial assumptions and, for some Sections, the additional cost arising from employers decisions to close their Section.

5. Solution to the pension crisis

5.1 The rail unions are embarking on a major campaign in support of the RPS. We have four key demands.
* Cap employee contributions at 10.56%;
* Keep benefits at least at their current level;
* Streamline the scheme to have three active sections (Train Operating Section, Engineering & Infrastructure Section and an Omnibus Section); and
* Keep the scheme open to all employees.

5.2 We believe these are entirely reasonable demands. The employers could bear responsibility for any additional contributions and recoup any overpayments from future surpluses.

5.3 The Actuary has indicated that in future years his proposed contribution rates have a 70-75% chance of producing a surplus. Therefore, it is not unrealistic to expect the employer to take up a greater part of any current shortfall. Companies are also able to offset additional contributions against corporation tax.

5.4 The pensions system could be made more efficient and secure by the RPS reverting to being one fund rather than individual sections. As a means of moving towards that situation we are proposing one Section for the TOCs, one Section for Infrastructure/Engineering Companies and one Omnibus Section covering the remaining employers. The 1994 Pensioners Section ? the section for pensioners at privatisation - would continue as at present.

6. Action required by the rail companies and Government

6.1 Prior to Christmas a joint letter signed by the rail unions was sent to ATOC rather than contacting individual Train Operating Companies separately in the hope that they would agree to our proposals as a way forward and the best way of facilitating affordable pension provision within the railway industry. ATOC has refused to meet us.

6.2. Similar joint letters were also sent to Network Rail and the Engineering companies: responses received have been disappointing. It is clear the employers want to continue raking high profits out of the railway and anything which reduces those profits is of no interest.

6.3. There is also the difficulty that the length of franchises/contracts act as a disincentive for Train Operating Companies and other rail contractors from taking on the liability of additional contributions now and recoup any overpayments from future surpluses in the future. For example South West Trains franchise ends next year.

6.4. Members in closed schemes would see an immediate reduction in contributions by moving to one of the three open Sections.

6.5. The unions have also written to Alistair Darling, Secretary of State for Transport. Despite a repeat letter, all we have received is an acknowledgement.

At a recent All Party Rail Group meeting, MPs asked the representative of ATOC to:

* Agree that ATOC should meet the rail unions to discuss ways of resolving the pensions crisis;

* Agree to make joint representations with the rail unions to the Secretary of State to seek a tripartite approach to protection the pension scheme.