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Sir TophamHatt

Stagecoach Lose EMT to Abellio / Disqualified from 3 Franchises

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On 12/04/2019 at 17:54, w124bob said:

I heard this Weds am straight from a Virgin WC manager, the WC pension fund is running a healthy surplus so guess who wants to get their hands on it. Virgin said no so Grayling  "you're out". I can't comment on other TOC's

Interesting - if the fund is in surplus (and that can change from to  year to year very easily) it suggests that it probably has been properly supported by the frnacjhisees although it would be interesting to see the numbers.   Alas for those in Whitehall grabbing money out of pension schemes is no longer as easy as it was and of course they can't take any more from non-state schemes than they manage to get through various current wangles and wheezes (most of which were thought up by Gordon Brown).

 

If such big number are being bandied about by DafT and Bob's report is correct I reckon somebody is going on about the reinsurance shortfalls rather than any scheme shortfalls.  As ever the numbers are meaningless unless they are qualified by explanation of what they refer to.

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One other aspect to take into account re pensions is the huge increase in NI contributions from 2017 with the forced reintroduction of SERPS(or what ever the modern equvilent is called). One of the reasons I retired early was this increase, drivers NI went up gy around £100 per month. Obviously company NI went up accordingly, but they are allowed to claw this back. The company I worked for took £47m from the pension pot in year1, all with the agreement of my former union . BR opted out of SERPS around the time I started (1978) ,under the new pension rules it would take around 10 years to see any benefit . So for those of us the wrong side of 55  there was little benefit( worse if you take into account lowered ability to AVC), and if you had broken service to jump company (post privatisation) or started post '97 you're T&C were more costly/restrictive for early retirement . I seriously believe there will be industrial action in the coming year, I don't regret early retirement.

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16 minutes ago, 4630 said:

Looks like things are starting to warm up for a legal challenge by Stagecoach;

 

https://www.railnews.co.uk/news/2019/04/15-stagecoach-demands-full-and-transparent.html?utm_source=dlvr.it&utm_medium=twitter

Maybe if there is a court case we will actually see some real numbers - which will at least indicate just what the pension fund shortfalls are, possibly.

17 hours ago, w124bob said:

One other aspect to take into account re pensions is the huge increase in NI contributions from 2017 with the forced reintroduction of SERPS(or what ever the modern equvilent is called). One of the reasons I retired early was this increase, drivers NI went up gy around £100 per month. Obviously company NI went up accordingly, but they are allowed to claw this back. The company I worked for took £47m from the pension pot in year1, all with the agreement of my former union . BR opted out of SERPS around the time I started (1978) ,under the new pension rules it would take around 10 years to see any benefit . So for those of us the wrong side of 55  there was little benefit( worse if you take into account lowered ability to AVC), and if you had broken service to jump company (post privatisation) or started post '97 you're T&C were more costly/restrictive for early retirement . I seriously believe there will be industrial action in the coming year, I don't regret early retirement.

I think what the change actually meant was the end of SERPS and the end of contracting out.   If you were in a BR pension fund you were contracted out of SERPS and paid a smaller amount in National Insurance which was balanced by the fact that you were contributing to a recognised pension fund - on retirement your state pension would be less than if you had been contracted in but you will also get your railway pension.

 

With the end of contracting out (new state pension scheme) your NI would be bound to increase but over time - depending on your age when the revised state scheme started - your state pension would be larger than a contracted out state pension.  But you would be, in effect, paying twice although it would be for two pensions.   Thus depending on your age for some people, particularly in their 50s it would be a close balancing act to work out whether they would gain or not if they were an ble to work to state pensionable age.  The answer is inevitably going to be different depending on your personal circumstances in respect of age, length of service, and so on.  I would think (but don't know the numbers) that if you're over 55 it is almost inevitable that you will be paying extra for little or no gain (I might be wrong, it all depends on your actual age and retirement date).

 

In some respects nobody, i.e. the state, is taking anything waway from you because what they are actually doing is withdrawing a concession (which still costs you money if you were enjoying that concession).  However it was one that had been in place for almost 40 years and which made a lot of sense if you were a member of a decent private or employment based pension fund;  alas lots of people aren't in that situation.

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DaFT and Grayling are taking on two sets of very tough and intelligent company "owners" in Stagecoach and Virgin..... I just hope DaFT are really "bullet"  proof as it won't just be the "boss" who feels the need to obtain some other form of work if they have not followed due process.

 

Baz

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3 minutes ago, Barry O said:

DaFT and Grayling are taking on two sets of very tough and intelligent company "owners" in Stagecoach and Virgin..... I just hope DaFT are really "bullet"  proof as it won't just be the "boss" who feels the need to obtain some other form of work if they have not followed due process.

 

Baz

 

Indeed

 

Remember the West Coast franchising debacle a few years ago? When first group initially started their legal action the DfT were being very bullish about there being nothing wrong with their processes and it was a massive waste of shareholders cash to even try to take them on.

 

Within weeks it was a very different story though......

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DfT and a legal dispute, what could possibly go wrong...... 

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Reminds me of that song, 'Who pays the ferryman' even if he doesn't have a ferry....

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I see the bearded one has had a bleat about it on LInked In (among other places).  I would have expected him to be saying a something along the lines of 'look how strong we have left the pension funding situation on the WCML'.  But he didn't. I wonder why?  Is it because he doesn't understand what it's all about or is it for another reason?

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Usually I'd enjoy any opportunity to take a kick at his royal beardedness, and enjoy taking a kick at Stagecoach even more, but in this case DfT is one of the few bodies I hold in even lower esteem than either. For all I can't stand the bearded wonder or Stagecoach I will say that whenever I use Virgin WC I find the service very good and their approach to customer service has always seemed very good. I also think Stagecoach did a very good job at SWT. Maybe that is because in both cases they have/had good railway managers in place to run the show but either way I think Virgin and Stagecoach deserve some of the credit even if just for having the sense to appoint good people. I haven't used EMT for many years so can't comment on that franchise.

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I'm told the EMT section pension fund is in good health and Arriva were disqualified from the bid for the same reason as Stagecoach.

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Posted (edited)

I for one wont shed a tear for the loss of Virgin.

 

I dont normally agree with unions either (i’m against the whole idea of them), however I have seen how pensions were basically stolen from US employees in the airline industry post Sept 11th, and unions were rendered helpless, as the choice was between killing the cow or forgoing the milk, either way you lose.  If your in a fund that owns a company the government forces to pay pensions, and it dies..you lose, if the company is allowed to forgive the pension.. you lose.

 You can end up with a scenario that is a flying pension fund... the airline only exists to pay todays pensions.. what future benefit is that to todays pension investor, or pension paying employee ?

For that reason ive never trusted pensions since, the UK model is an adoption of the US model, a decade or so behind, so the same issues will arise at the right crescendo point.

 

So in this instance the unions do need to be ready as the US pension massacre will eventually be used across all industries in the UK, not just railways. All it needs is a trigger excuse to get everyone in on the action, Sept 11th was the US, Brexit could be the UKs excuse, or something else later.

 

Pensions are in my mind just a legalised scam, or a tax lottery when it comes to the younger working generation, especially as the government keeps moving the retirement ages further out, companies are allowed to dodge, returns dont pay out as promised and eventually people will still be in work or die thus voiding the payout (Been there seen that trick in action in 2017).

 

The current generation has a tight hand on it, as they were in first, get more payouts and protections whilst the money to pay is still from a dwindling pile of yesterdays savings, if its not already consuming todays income.

 

Its the younger ones who are being forced to play higher stakes whilst sat at a bent roulette table, being told how good their odds are. But when the ball lands on black, the croupier will have already have retired from the table with his comission long ago, and the house wont have the money to pay.

 

Bringing this back to topic, did the DfT exclude them, or did the bidders set up a scenario where they knew they would be excluded ? -After-all its in their interests to lose the liability and they knew what they were doing when they submitted the bids... in my mind it was no accidental omission, they know what they are doing and will have a strategy to play this out. Lets not forget Virgin has been on the WC franchise since privatisation, which at expiration will be 23 years, is approaching half a working persons career, lets not pretend they dont know what pensions liabilities exist. 

The DfT didnt have to announce disqualification, they could just have announced a winner, they havent and have stalled.. 

any news story isnt the “what”.. its the “why”

The unions have clocked this, its not over, its not even started yet.

 

 

Edited by adb968008
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Pensions are a rather complex issue. The Stationmaster has highlighted that unless you know the basis of the figures which are being thrown around then you can't really understand what they mean as they could mean different things. There is also the huge divide between defined benefit and defined contribution schemes, and opinions of pensions will be coloured by which of these two schemes they refer to. It was obvious even in the 1980's when I was at school that the old defined benefit model was a ticking time bomb and the shift to defined contribution was already started (aided by some sharp selling of personal pensions at the time).

Most people now are probably in defined contribution schemes, in many ways it is easy to dismiss them and if you are fully self funding then I wouldn't put money into such a scheme as I think you can get better value and control over your assets elsewhere even accounting for the tax benefit of paying into a pension. However, in many cases employers pay a big lump in as well and if you opt out you are declining to accept a large additional payment from your employer. Few employers will compensate by lifting your salary to offset that. I know it varies, but in my case if I pay 6% in my employer pays 17%. Given that I pay the 6% off gross, not net pay, then it'd be silly not to join the pension (my employer is clear that you join the pension or you forego the 17%). Yes, I think pensions tend to be poor value, but if you are getting a big chunk thrown in then it's sensible to join. And for all their faults, at least with a defined contribution scheme you can see your fund accounts online, make decisions on what growth/risk plans to use etc.

 

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A while ago my esteemed employer tried to get me to change my pension to a so called 'Smart Pension' but I declined as l could see no benefit to me and it seemed to be some sort of slightly iffy sounding scheme to all employers to reduce the amount they pay in.

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9 minutes ago, John M Upton said:

A while ago my esteemed employer tried to get me to change my pension to a so called 'Smart Pension' but I declined as l could see no benefit to me and it seemed to be some sort of slightly iffy sounding scheme to all employers to reduce the amount they pay in.

 

Aren't they just a tax evasion method?

I'm sure the company pays more in to the pension so you don't get paid it and thus it doesn't get taxed?

Can't remember the blurb when I was encouraged to do it.  I did enrole but then left that area of the railway.

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I'm wondering if the real issue here isn't pensions,but a desire to get franchisees to take on more of the risks associated with the franchise. So this discourages firms who bid high to win the contract, safe in the knowledge they can walk away with a limited financial hit if the franchise doesn't deliver the expected return. Obviously I've no idea which firms would do that......

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3 hours ago, Sir TophamHatt said:

 

Aren't they just a tax evasion method?

I'm sure the company pays more in to the pension so you don't get paid it and thus it doesn't get taxed?

Can't remember the blurb when I was encouraged to do it.  I did enrole but then left that area of the railway.

 

Its a National Insurance fiddle as pension contributions come out of your wages before tax is applied.

 

By reducing your 'headline' rate of pay (but not your actual 'take home' pay then your national insurance contribution drops slightly, while your employers NI contribution falls even more.

 

However from a cooperate perspective if you multiply the NI saving by the number of employees means BIG savings for companies - which is why there as such a push to get folk to sign up*

 

HM Treasury have amazingly not decided to close this loophole in law and are on record as saying it is a perfectly acceptable financial tool.

 

 

* Because you are effectively required to take a pay cut for this practice to work, it represents a change in your T&Cs so you need to give your consent for it to happen. In theory you run the risk that less scrupulous companies might seek to make the lower 'headline' salary what you get paid - but in the railway industry the likes of the RMT are well aware if the possibility and won't hesitate to take action if companies feel like taking liberties in this regard.

 

 

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Whilst it is apparently vital to award executives and shareholders massively for running a rail franchise in the UK, it seems that recognising the efforts of those who work "at the customer interface" is not in the corporate model. Workers' pensions are a fair part of such agreements and any attempt to absolve itself from pensions contributions or liabilities can be interpreted as unacceptable to the majority of the working population. Exactly what these companies are seeking to escape from will not be published so a broad-brush response from teh public is only to be expected. 

I cannot see anyone with an iota of sense supporting the Rt Hon Grayling but it isn't just him, is it! We have a lame government run by an effigy. The myriads of civil servants who have absolutely no experience in any field of transport yet run the DofT are no different from the battalions of similar people plaguing the DfH and the DfE - all contributing their political ideology in fields that they have NO experience and even less understanding. We're all doomed, I tell you, doomed!

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4 hours ago, great central said:

Apparently a seven day extension to the standstill period has been granted..........

Reported by a respected journalist elsewhere that the standstill is effectively on hold indefinitely 

 

DfT in a state of somewhat paralysis 

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10 minutes ago, black and decker boy said:

DfT in a state of somewhat paralysis 

Which I take as the DaFT not having a clue what they are doing!

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7 minutes ago, royaloak said:

Which I take as the DaFT not having a clue what they are doing!

Nothing new there then......

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Hmm, there's quite a lot of speculation in this thread which misses the actual problem. The issue is not about the funding of the pension scheme whilst the frachise in operation; it is about potential future liabilities. Whether the TOC pension fund is in surplus now is entirely irrelevant to the problem. Even if it is in surplus now, there will be employees who will not be entitled to draw a pension for 10, 20, 30 years - if you are a 25 year old trolley assistant you are many years away from having your pension due. The nature of franchising means that the DfT signs over the operation of a TOC for a few years; and then offers it again in a new competition. Up until now, bidders signed up to the pension scheme obligations for the duration of the franchise - but in an increasingly uncertain world, the actuaries and auditors flagged up to DfT that there was a potential funding risk to existing obligations between the end of the franchise and employees drawing their pensions. This risk by default sits with the government, so the DfT tried to alter new franchise competitions so that the successful bidder has to agree to make up any potential future shortfall that may emerge in future in relation to the pensions of the staff for the time they were employed during the franchise. Whilst this might sound reasonable at first glance, it represents a potentially open ended long term uncapped liability that no company can reasonably accept.

 

It appears that for strageic reasons a bidder backed by the government of another country has agreed to accept this risk, but it's really a pyrrhic victory for DfT as they have effectively killed off the current franchise process as a competitive process. Given the Williams rail review it's probably just as well because the current model is completely unsustainable, and the game of smoke and mirrors whereby the government continues to pretend that the industry is privatised (because it's useful to be able to demonise evil shareholders for any shortcomings) when it is in practice entirely micromanaged by civil servants in Horseferry Road has really run out of road (rail?). 

 

 

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