Unions threaten strikes as TfL scheme review models pension cuts – DB & Derisking

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Sir Brendan Barber’s independent review of TfL’s pension schemes began after the transport authority and central government agreed a bailout in June 2021.

The deal was for six months, with the government demanding a pension review as a condition of the deal.

TfL’s finances have been ravaged by the coronavirus pandemic, which reduced passenger numbers and caused a 90% drop in TfL’s revenue at the height of the crisis.

It is considered to be about the only perk of the job beyond employee salaries and travel concessions

Sir Brendan Barber, Head of Independent Review

In early March, commuters suffered two days of travel disruption as staff quit attempts to find savings in the scheme.

Pension contributions cost TfL around £375m a year, although that figure will rise to £401m in 2021. A report commissioned by the Mayor of London claimed the reforms could save up to to £100m a year for the transmission network.

Barber’s final report, published on March 28, fell short of making a concrete recommendation for the future composition of TfL’s pensions.

“A high-quality program is a highly valued condition of employment, particularly highly valued – as in the case of TfL – if it is seen as about the only benefit of employment beyond employee salaries. and travel concessions,” he acknowledged. .

The report modeled several avenues for the program, including maintaining its existing provisions.

The Transport and Salaried Staff Association union said the ‘no change’ option vindicated the workforce and revealed the government’s ‘politically motivated’ scrutiny.

Benefits may be reduced

The report acknowledged that changes to the scheme would impact benefits and wages elsewhere, and affect TfL’s ability to recruit and retain staff.

He confirmed four options that had already been set out in an interim report published late last year.

These avenues consisted of keeping the current system of the plan, providing for a modified end-of-career salary plan, switching to a defined benefit plan based on the revalued average career compensation, or to a CARE plan with contribution levels .

He ruled out the introduction of a defined contribution plan, a DC self-enrollment plan, a group defined contribution plan and a cash balance plan.

The report’s modeling for the modified final salary options produces annual savings in the range of £79.3m to £182.4m.

Modeling CARE schemes, including those with scaled contributions, would result in cost reductions of up to £154.4 million per year for a cost increase of £23.1 million per year.

“Almost all benefit mix scenarios include reductions in future service benefits available to members and an increase in dues from the current position,” the report said.

He added that these benefit cuts or dues increases would not be felt equally by members.

Members’ accrued benefits have been ring-fenced as part of the terms of the review. The report says this could be achieved by basing retirement pension calculations on a “termination of service basis”, as defined in a section of the Pensions Act 1995 which protects past benefits by limiting the power modification of a regime.

Another option would be to calculate them based on the member’s last salary, as is normally done in the public sector. It could also be conducted using the higher of the two options, he suggested.

“Given the scheme’s reassessment rules and wage moderation, it is unclear what would yield the best outcome for TfL scheme members,” the report said.

This will depend on members’ individual circumstances, how close they are to retirement and TfL’s future pay policy, he added.

Plan in excess

The report describes the scheme as “well run and highly valued” and notes that its pending actuarial valuation for 2021 will produce “a modest surplus”.

Union leaders seized on the optimistic assessment of the plan’s funding level and operational health, threatening to strike in response to any attempt to dilute members’ benefits.

Manuel Cortes, TSSA General Secretary, said: “Today’s independent review has shown what we have known all along – that TfL’s pension fund is viable and need not be cut workers’ pensions. It’s vindication for TfL workers.

“We are absolutely clear – any move to scrap TfL’s pension scheme, any demand for workers to pay more for less, is a red line and we will vote for a strike.”

Finn Brennan, organizer of the Associated Society of Locomotive Engineers and Firemen’s London Underground, echoed the TSSA’s threat of industrial action.

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“The report makes it clear that if changes were to be made to the plan, they could have a huge impact on the income that staff receive in retirement, which would be neither fair nor sustainable,” he said.

“No specific changes are recommended and primary legislation would almost certainly be required if TfL seeks to make changes without member agreement.

“If TfL or the government try to impose damaging changes, the result will be long-lasting and impactful industrial action.”

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