CarlisleCityRMT

Railways Pension Scheme Valuation as at 31 December 2008 – Northern (ex North East) Section

To Mark Eilbeck:- 11 November 2008

I have received your letter of 10 November and note the attached letter from David Maddison, Client Services Director, rpmi. That version of the letter was sent to all TOC employers and Pension Committee members following a decision of the Trustee’s Benefits and Funding Committee and the Actuary to revise the draft actuarial valuation in recognition of the unprecedented turmoil in international financial markets.

Whilst I have some sympathy with your comments that as these fell after the valuation date they should be disregarded and taken into account as necessary in the 2010 valuation, the Trustees and the Actuary felt that the events were of such magnitude some recognition should be given to the impact on the Scheme’s assets. I am advised that not to take some cognisance of the situation would have been deemed to be imprudent.

Similar letters were also sent to other employers, but with variations depending on the strength of employer covenant. The assets of those with a very strong covenant; ie those where the Trustees feel the employer is financially robust and able to withstand significant economic instability, such as TOCs and Network Rail, have been adjusted by 3.75%. Employers whose covenant is deemed to be less than very strong will have their Section’s assets revised by 7.5%. For those remaining Section’s, whose employers’ covenant is deemed to be less robust, the actuary has yet to provide a formal draft valuation and is currently still considering his recommendations.

This decision results in a reduction of approximately 3.75% of the TOC Sections’ Technical Provisions ie the assets and liabilities. The funding position, which takes into account previously agreed contribution schedules and reserves, will also be reduced by 3.75%. These reductions will not affect the Joint Contribution Rate, as that is the rate required to purchase future benefits, but obviously, it could have an impact on future contribution rates if additional deficit funding is required to cover a shortfall. My understanding is that a majority of TOC Sections have a past service surplus but that contribution rates will need to rise to cover increased longevity expectations. The likelihood is that the 7.5% adjustment will move such sections closer to parity or marginally below 100% funding but until the employers and the Trustees reach agreement on the actuary’s latest proposals; for which a deadline of 24 November has been given, definitive details of individual Section’s funding positions cannot be confirmed.

In the meantime discussions are continuing between TOC representatives and the Unions on the possibilities for reducing further contribution rates and members will be advised of developments as soon as possible. Whilst this process is continuing, Pension Committee members and RMT negotiators are urged not to reach agreement on any changes to fund benefits until clearance has been received from Head Office; although Pension Committee will, of course, be required to approve their revised funding positions. Notwithstanding the above, I very much appreciate that the time for reaching agreements is now severely truncated.

Yours Sincerely

Bob Crow

General Secretary