CarlisleCityRMT

Network Rail CARE Pension Scheme (MRP/1/8)

Letter sent to the Secretary of all Network Rail Branches:- 4th November 2008

Network rail has written to every employee giving details of the new career average pension scheme which commenced on 1 November 2008. The pack includes application forms for the new scheme and I am very concerned that this may encourage existing Railways Pension Scheme (RPS) members to transfer into the CARE arrangement without fully appreciating the serious implications involved.

I would therefore stress that the CARE Scheme has not been agreed with the Unions. RMT wants the Railways Scheme to be open for everyone and to negotiate an agreement which does not disadvantage anyone. I would also stress that if you continue to contribute to the Railways Pension Scheme and wish to remain a member you need do nothing. Members who are considering moving to the CARE Scheme should not do so without first having taken advice from a registered independent financial adviser.

Whilst CARE contributions appear lower than the RPS rate, this is not always the case as the headline rate of 7.2% is calculated on a higher base than the RPS rate of 11.38%. It is imperative to also consider the actual pension derived from the contributions. The pension obtained from the CARE Scheme is very sensitive to pay increase and inflation. Management’s examples use inflation at 2.5% - half the current rate.

One of the more important issues which the Network Rail letter fails to emphasise strongly enough is that RPS transferees will lose future BRASS matching. Therefore whilst management has provided a comparison of benefits there is no indication of the long term cost of losing BRASS matching. In addition Network Rail also fails to point out the significant impact promotions can have on an individual’s pension entitlement in a final salary scheme.

RMT believes insufficient emphasis has been given to the fact that the CARE scheme’s minimum retirement age is 65, compared to 60 for the RPS. This means that any RPS tranferees would be giving up the right to retire before age 65 without a reduction in their pension. This reduction would only affect future service but it is an important issue and becomes more so the longer an individual is from retirement.

Another important benefit where the CARE scheme is inferior to the RPS is index-linking when pensions are in payment. In the RPS pensions are increased annually by RPI, regardless of whether inflation is 2% or 10%, whereas CARE increases are RPI but capped at 5%. But the 5% could be reduced at a later date because somewhat alarmingly management’s demonstration CD talks of RPI index-linking for the CARE scheme as being ‘currently 5%’. This suggests that it will be reviewed in the future, and as Government has recently introduced legislation to reduce the minimum index-linking from 5% to 2.5%, it would not be surprising if an attempt was made to reduce this very important element of pension protection.